How to Withdraw From a Partnership

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The ending of a partnership is legally referred to as dissolution of the business. Unless your fellow partner(s) agree to buy out your share of the business, the company closes for business and settles all debts with creditors. Dissolution of the partnership can be voluntary, where partners agree to wind down the business or draw up a new agreement with new partners, or involuntary, where the courts intervene to settle disagreements.

Things You'll Need

  • Partnership contract
  • Write down precisely what you wanted from the business and what you were prepared to give. Document your dissatisfaction with the current state of things and the reasons why it’s not working. Even if you are keen to dissolve the partnership, consider if any other outcome, such as your partner taking on additional responsibilities, would be satisfactory.

  • Talk to your business partner to discuss a “voluntary dissolution”. This is where both partners agree to terminate the partnership and organize winding down the business. This requires no legal proceedings and is a much simpler route to take. You could also offer to sell your share of the business to your partner, which would end your interest in the company.

  • Speak to your lawyer for advice if you fail to reach an agreement with your partner. The type of agreement you have will dictate your legal position and the likelihood of success if you attempt to dissolve the partnership.

  • Ask your lawyer about your rights if you want to withdraw as a “general” partner. This can usually be done at any stage of a business by providing written notice to your fellow partners. However, you may incur financial liability if this withdrawal violates your partnership agreement.

  • Provide at least six months notice if you intend to withdraw your interest as a “limited” partner. Limited partners are entitled to receive any salary or profits due to them as long as the withdrawal does not violate specific terms in the partnership agreement.

  • File a lawsuit with your lawyer if your other partners don’t want to dissolve the agreement. If the court agrees with your reasons for breaking the agreement, they can order an “involuntary dissolution” of the business.

  • Start court proceedings with the help of your lawyer if the business you are involved in is in a dire financial state. In this situation, the court can dissolve the partnership and sell off company assets to pay off creditors.

References

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