As a Partner in a Business, What if I want to End the Partnership?
Business partnerships start out with the best of intentions. Not unlike a marriage, partners go into business with optimism and the belief that they can overcome anything on their way to achieving success. In the beginning, it is easy to overlook the weaknesses of the other partner(s) and assume that they will not get in the way of accomplishing your business goals. After the business launches, however, you encounter the inevitable struggles and perhaps you learn some things you didn’t know about your business partner(s). Circumstances outside the business also tend to change (sometimes significantly) over time, making it more difficult to stay involved with the partnership.
These and other factors converge and bring you to the point of deciding, “I need to get out of this partnership. What are my best options for doing so?”
There are several reasons you may want to get out of a partnership, some of the most common include:
- Incompatibility/irreconcilable differences with your partner(s);
- A change in careers;
- The need to relocate out of the area;
- A disability or incapacitation;
- The death or serious illness of a loved one.
If you are a business partner who, for whatever reason, wants to get out of a partnership, there are a few ways you can go about it:
Restructure the Partnership
This option works well if you still want to have a role in the business and there are no major disputes between you and your partner(s), but your outside commitments are demanding more of your time. This could also be used as an interim step if you are thinking about leaving the partnership altogether at a later date, but still want to remain involved for a while longer. With this option, your partner(s) assume a greater role in the business and your role is diminished. This might also mean selling part of your interest to the other owner(s). Sit down with your business attorney for guidance on how your partnership agreement should be revised to reflect the change in roles. If this also involves the sale of part of the business, you may need to have the business appraised by an independent professional, so you can settle on a price.
Sell your Interest in the Partnership
Maybe you want to exit the partnership altogether for personal reasons or because you and your partner(s) are no longer on the same page. If you want to leave and the other owner(s) want to continue operations, the most sensible solution for everyone involved may be to sell your interest in the business. This process can get complicated, however, if there are disagreements about what your shares are worth. As with the previous option, be sure to have the business independently appraised. You may also need to retain the services of an experienced business attorney during negotiations to ensure that you receive a fair price. If your partnership agreement was written comprehensively, there should be a buyout clause in it that provides additional guidance for this type of scenario.
Dissolve the Partnership
Maybe the business cannot continue to operate successfully without you, and/or your partner(s) also want to call it quits if you leave. In such cases, the cleanest way to exit the partnership might be to dissolve it. Your original partnership agreement should outline the essential steps that need to be taken to complete the dissolution process; such as filing dissolution papers, closing accounts, liquidating assets, settling debts, notifying vendors and clients/customers, handling government filings and tax issues.
What if There is no Partnership Agreement?
Many business partners do not put together a written partnership agreement when they begin operations. If you are in this situation, the process of leaving the partnership becomes less certain. Hopefully your partner(s) are reasonable, and you can agree (among yourselves) to act in good faith and come up with a resolution that is fair for everyone. If there are major disputes, however, you will need a seasoned business and commercial disputes attorney in your corner to advocate aggressively for your rights and interests.
At the law offices of John H. Ruby & Associates, we have extensive experience with all aspects of business law. We work closely with business partners when they form a partnership to set up a comprehensive written agreement that effectively accounts for all known eventualities. When irreconcilable disputes arise, we help clients resolve these disputes in the way that is most practical while fully protecting their interests. Whenever possible, we seek to negotiate reasonable settlements between business associates. If necessary, however, we are ready and able to pursue appropriate relief through litigation and upon appeal.
To schedule an initial consultation with one of our skilled attorneys, call us today at 502-895-2626 or send a secure and confidential message through our online contact form. You may also visit our Louisville office in person.