If there is no agreement to the contrary, if one partner wishes to end the partnership, they can inform the others of their decision by way of a dissolution notice. This states their intention to withdraw, and whether the remaining partners wish to continue with the venture or not, they are required to consider a number of factors that must be dealt with.
This is much simpler if there is a partnership agreement in place to deal with the exit of a partner or procedure upon dissolution of a partnership. Failure to do so can lead to the process becoming very drawn out and costly for all concerned.
Matters to address if your partnership is dissolved
Chiefly, it must be decided how the partnership assets will be divided and who will remain responsible for its liabilities. Further factors to resolve include who will have the right to use the business name, who gets access to its customer list and who prepares the final accounts.
There will also be employees and work in progress to look after, while the issue of outstanding debts and tax obligations can often be difficult to resolve.
The Partnership Act 1890
If you partnership agreement contains no provision for dissolving the partnership, a dissolution notice can take effect immediately under the Partnership Act 1890. Under the Act, a partnership can also dissolve at the completion of a pre-agreed period, once a project has been completed, when a partner dies or is declared bankrupt, or if the partnership is found to be engaging in illegal activity.
Having a partnership agreement in place puts you in a much stronger position to deal with a possible dissolution notice from one or more of the partners.
Ask Ralli Partnership Law solicitors for advice
As we can see, the issue of dissolving a partnership is very complicated, so it is best not to be too hasty if you are planning to issue a dissolution notice.
Our solicitors have years of experience in dissolution cases, and can advise you on how best to prepare for informing your fellow partners of your decision to dissolve the partnership, including any risks you could face in doing so. Call us on 0161 832 6131 for more information.