You hoped that it would never come to this point, but you now need to dissolve your business partnership. Problems may have been brewing for some time, or perhaps matters only recently came to light that make continuing the partnership not just unwise but untenable.
But breaking up a business partnership is a bit like getting a divorce from a spouse. For instance, when you get divorced, if you had the foresight to sign a prenuptial agreement, that will become essentially the blueprint for the divorce. The same is true with your partnership agreement when dissolving the business partnership.
Review your documents
Before taking any action to end the partnership, it's important to review your business documents. Your partnership agreement and/or the Articles of Incorporation may contain important information regarding the process of dissolution of the business partnership. Your attorney can review them with you and offer guidance and advice to make sure that everything is done correctly.
What if your partnership agreement doesn't address the dissolution?
That is a distinct possibility, especially if the partnership was fairly informal, such as those between relatives or spouses. But while informality may have been the mode you once operated in, when it comes down to dissolving the partnership, you want to err on the side of formality.
Therefore, make sure that you put your intentions in writing and send it certified mail to your partner so that you have a record of this notification.
File dissolution documents with the state of New York
To eliminate any uncertainty, it's prudent to file dissolution documents with the state. This places your creditors on notice that your business is no longer taking on debt under the former terms of the business partnership.
This is very important, as both business partners are liable for debts of the partnership, and each partner can obligate the partnership with the decisions that they make.
You will need to resolve creditors' claims
Depending on the nature of your business and its status at the time of dissolution, you may have outstanding debts and/or claims from creditors. These will need to be satisfactorily resolved before either of you are free of the obligation.
Don't forget the tax implications
The last thing either of you want to do is run afoul of either the Internal Revenue Service (IRS) or local and state tax offices. Remember that your company still has liability for taxes owed for both this year and the one prior, if applicable. Forgetting or neglecting to file annual or quarterly taxes can create enormous headaches for both business partners.
Confused yet? That's understandable
You may be thinking that extricating yourself from this partnership is much more difficult than it ever was to form it. That's why many people in your same situation choose to loop in their business law attorneys when attempting to dissolve a business partnership.