Retirement from partnership
How to deal with retirement in a partnership
In the absence of agreement to the contrary, retirement from partnership cannot occur under a general partnership. Instead, the individual must serve a notice to dissolve the entire partnership. If there is more than one remaining partner, they can then reform the partnership. Yet, there are tax implications involved in the process.
Allowing provision for a partner’s retirement in a partnership agreement can allow partnerships to continue following the retirement of a partner. Through planning ahead and setting out retirement terms in a well-constructed partnership deed, you can make sure that retirement from partnership is a straightforward process.
Your partnership agreement
A separate agreement allows you to amend the terms set out in the Partnership Act 1890 so that you have further control over how your partnership is regulated.
Regarding the retirement of a partner, a partnership deed should cover return on capital and the interest to be paid. You can set out a specific timescale and terms regarding how the capital is given back to avoid the retiring partner demanding immediate withdrawal. If the office property is owned by the individual, you should also set up an agreement where the space is leased or bought out.
Restrictive covenants can be put into place to prevent the leaving partner from carrying on in a similar business within a specific time period or location. You can also choose to set up conditions surrounding retirement allowances, early retirement and the liability of retired partners.
Ralli Partnership Law services
Ralli Partnership Law are experienced in drafting up partnership and LLP agreements that deal with the exact requirements of all partners. Through taking such preventative action, you can make sure that the retirement of a partner does not affect the day-to-day running of your business.
We also work with partners during the removal, suspension and exiting of a partner, providing specialist legal advice on the best course of action. To speak with a member of the legal team, contact Ralli Partnership Law for a free consultation.Back to our services