Can I end a partnership and keep the business?
July 19, 2017
It’s a tale as old as time, or at least as old as modern business law. Individuals form a business partnership with great intentions, but somewhere along the way things get complicated and ultimately untenable for at least one partner.
Many partners see the end of the partnership as the de facto end of the business as well, but it doesn’t have to be. With careful planning and perseverance, partnerships can fairly dissolve while the underlying business remains intact.
Partnerships are incredibly unique business relationships for many reasons, chief among them because it is possible to form them without any documentation. Of course, this almost never makes dissolving a partnership any easier.
In truth, it is far, far easier to set terms on a partnership dissolution during the partnership’s formation. However, failing to do so does not spell automatic disaster.
How do I determine fair dissolution terms?
If you and your partner want to end your business partnership and one of you wishes to keep the business, then all partners must agree on fair terms under which this can take place.
Partners are supposed to share equal portions of the income, assets and liabilities of a business, so if you or a partner wish to leave, you must find a fair way for you to either receive a buyout of your share of the business’s value for you to make up your portion of the business’s debt.
The fewer agreements your partnership has dictating these terms beforehand, the more complicated it is to reach them when one partner feels it is time to go. In times like these, it is wise to consider seeking help from an attorney who understands how to value and counsel business relationships.
Consider professional guidance
This approach has a few distinct advantages. First, an impartial, professional attorney familiar with business law can help you fairly identify exactly what each partner’s share is worth and find strategies for buying out the leaving partner’s share or finding another equitable arrangement.
Second, it is possible that you and your partner do not actually have to end your partnership. In many cases where a business partnership struggles, these conflicts can find resolution by working with an experienced business attorney with a keen understanding of the inner workings of both functional and faulty business relationships.
However you choose to move forward, it is important to understand the implications of your potential dissolution. Like marriages, business partnerships are easy to enter, but rarely as simple to exit.