Ending a partnership requires careful steps to protect each partner from lingering liability. The partnership agreement, if you have one, usually governs the process.
Steps
- Review the partnership agreement for exit and buyout terms.
- Agree on dissolution and an effective date.
- Value assets and liabilities.
- Pay creditors first, then distribute what remains.
- Notify customers, vendors, banks and tax agencies.
- File dissolution paperwork with the state if required.
Dissolution agreement terms
- Division of assets and debts.
- Who keeps clients and the business name.
- Confidentiality and non-compete terms.
- Release of claims.
- Who maintains records.
Risks
- General partners can remain liable for partnership debts.
- Unfiled tax returns.
- Disputes over valuation.
- Failing to notify creditors.
Get help
An attorney and accountant can help protect you and file correctly. See our guide to partnership agreements.
Frequently asked questions
Can one partner leave and the business continue?
Depending on the agreement, through a buyout.
What if we disagree?
Mediation or court may be needed.