Dissolution of Partnerships: What You Should Know
The people of Melbourne know that they can trust our team of commercial litigation attorneys to help them with their legal needs. We fight diligently for our clients, noting contracts and agreements as well as the current interests at hand.
The stakes are high when dealing with any sort of business. In fact, sometimes the stakes are their highest when a business is coming to an end. With that in mind, let's consider some issues that come about when a partnership is dissolved.
The Definition of "Partnership" in Terms of Business
A partnership is when two or more people enter into an agreement to run a for profit business in which money, labor, profits, and so for will be used and divided in predetermined amounts.
What is a Dissolution?
A dissolution, in basic terms, refers to the process of ending the existence of a business. There are a few different kinds of dissolution:
Voluntary Dissolution – This is when the dissolution is agreed upon by owners, directors, and shareholders of a partnership.
Involuntary Dissolution – This is when the dissolution is not carried out or agreed upon by the shareholders of the partnership.
Administrative Dissolution – This is when the state steps in and dissolves a partnership, often for violations of the law.
The Basic Process of Dissolution
Here is the general step-by-step process of dissolving a partnership in the state of Florida.
Reviewing Partnership Agreement – If you have a partnership agreement, give it a look to check for any instructions regarding dissolution and the share of responsibilities in such matters.
Voting to Dissolve – It's important to have consent from partners before going through with dissolution. Hold a vote or action with all partners regarding the plan to dissolve.
File Proper Forms – It's a good idea to file a Statement of Dissolution with the state of Florida to make clear that the partnership has dissolved officially.
Winding Up the Partnership – As part of ending the partnership, it's important that work in progress be completed, that debts are settled, and that assets are properly distributed.
Notifying Others – Customers, creditors, suppliers, and clients of your partnership should be made aware of the dissolution.
Addressing Tax Issues – Upon dissolution of a partnership, there may be state and federal tax matters to keep in mind.
Addressing Out-of-State Matters – If the partnership did interstate or out-of-state business, it's important that these matters are all properly settled.
Where Disputes May Arise
Disputes may arise at various points during the dissolution process. Initial agreements may have serious problems with wording, or may have unique stipulations in place regarding dissolution among partners. During the vote or action to dissolve, some partners may prefer a buyout rather than fully ending the business. There may be disagreements about the handling of debts and assets. Of course, one must also consider the added difficulties brought on by involuntary or administrative dissolutions.
Between just two people in a partnership, these matters can get complicated. Where there are many people involved in a partnership as well as investors and other parties who may have interests in the partnership, issues can become even more convoluted.
How Business Attorneys Can Help
Working with a business attorney can help smooth out the process of dissolution. We can offer insight and guidance into the process, helping all parties involved. In the case of disputes between partners, we can help mediate and negotiate to help bring about a good outcome for the various parties.
Learn More About Business Law Matters
For more information about the dissolution of partnerships and other matters related to business litigation, be sure to contact our team of attorneys today. Our team will work with you to help ensure easy transitions and to offer you peace of mind.