The big decision to leave a business partnership often involves big personalities and a lot of money, so partnership dissolution needs to go well and be done right.
Start thinking strategically now
Attorneys often say it but it’s especially true in this case. Consider contacting a qualified attorney before doing or even saying anything else.
Virginia law specifies what dissolves a partnership and at what instant the deed is done. First on the list is “the partnership's having notice from a partner … of that partner's express will to withdraw as a partner, on a later date specified by the partner in the notice or, if no later date is specified, the date of notice.”
Therefore, you and even your attorney must be careful not to inadvertently give notice that the partnership has already dissolved before negotiations on the details of the dissolution have even begun.
Study the partnership agreement, if any
It help you only in your next business venture, but the best way to dissolve a partnership is to follow the steps laid out at the onset of the relationship in a comprehensive, well-drafted partnership agreement. Such agreements prevent drawn-out, expensive, and bruising disputes at the end of the partnership. They can also make the partnership more successful by clarifying how the business will make decisions, assign responsibilities, resolve disputes, and so on.
Consider mediation before considering lawsuits
Partnership dissolution is sometimes called business divorce, and like the dissolution of marriages, they can get nasty and expensive. In both kinds of breakup, mediation can be faster, cheaper, and leave everyone happier and perhaps even friends. But remember, the agreements (if any) arising from mediation still must be approved by a court to be binding.
Things can get sticky
Business partnerships have potential to be easy, profitable and attractive to talented employees. But partnerships often break up relatively quickly and when they do, the issues involved sometimes surprise everyone.
A partnership exposes its partners to unlimited liability for the actions of the partnership itself. You may share various debts, taxes, insolvency and legal liability with your partners, and how dissolution changes things will have to be decided.
Commonly, the stake and liability of one partner can’t be transferred without the unanimous consent of the other partners. This default rule can be difficult to satisfy, especially in an already conflict-ridden partnership.
If a partnership had no dissolution agreement, other questions may also be uncertain. For example, authority and liability is often shared equally among partners, so one partner might enter the partnership into contracts without the other members’ consent or knowledge. Be prepared for the chance that your dissolution of the partnership could bring surprises.