Partners can create a partnership easily—often with nothing more than a handshake or a plan written down on the back of a napkin. However, the trade-off for that ease is that partnerships can often be more difficult to end, especially when only one partner wants out. In many cases, when the economy or business circumstances change, entrepreneurs find themselves asking, Can one partner dissolve a partnership?
There are many reasons partners may want to end a business partnership. One partner may want to retire, and the other may want to keep the business going. Or the partnership may have been created to accomplish a specific goal, and once the goal was met, one person may want to wind up the business, and the other may not. So, do all partners have to agree to dissolve a partnership? It depends. At Mallery s.c., our team helps Wisconsin entrepreneurs understand how partnerships work and how they can be dissolved so that they can make the best decisions for their business.
What Does Your Partnership Agreement Say?
Your partnership agreement may include a dissolution clause or terms of dissolution. In that case, the terms of your specific partnership document may answer the question, do all the partners have to agree to end a business agreement? Some partnership agreements can be highly specific and even include exact dissolution procedures to be followed under each dissolution scenario. For instance, if you are terminating your partnership because one partner is retiring, your partnership agreement may specify one procedure. However, if you are dissolving the partnership because you want to convert it to a different business entity type, the agreement may specify a different procedure entirely.
If you have questions about how to dissolve your partnership under an existing agreement, be sure to contact an experienced Milwaukee business attorney. A member of the Mallery s.c. legal team can help you understand your rights and obligations under an existing partnership agreement.
What If There Is No Dissolution Provision?
What if your partnership agreement does not include any dissolution provisions? In that case, do partners have to agree to dissolve a partnership? Or what happens if you and your partners never had a formal partnership agreement to begin with, and your business was founded on a handshake alone? In these cases, you will need to sit down with your partners and decide on the terms of dissolution together.
Without a partnership agreement in place, Wisconsin’s Uniform Partnership Law will provide default rules that govern some of the most important aspects of a partnership, including how to dissolve a partnership. In the absence of a partnership agreement, you will be stuck relying on these one-size-fits-all state laws.
If you and your partners struggle to reach a dissolution agreement, you can seek the assistance of an attorney or a mediator. If an agreement cannot be reached, you can request that a court issue an order ending your partnership. However, a court may not order an ideal or even equitable division of your partnership’s assets and debts. That’s why having a well-crafted partnership agreement with dissolution terms is so important.
How To Dissolve a Partnership
Even if your partnership agreement contains guidelines to help you terminate your partnership, you and your partners should discuss how you want to handle a dissolution in advance of it happening. Once you have come to an agreement, you can create a partnership dissolution agreement. This type of agreement sets out the termination terms you and your partners have agreed to and can clarify issues if disputes arise in the future. A member of the Mallery s.c. legal team can help you draft a dissolution agreement tailored to your partnership’s unique needs. Even if a lawyer does not help you draft the agreement, be sure to have it reviewed by an attorney before you sign it.
How Mallery s.c. Can Help
When you have put your heart and soul into a business, it can be hard to walk away. At Mallery s.c., our experienced business attorneys can guide you through every step of the partnership dissolution process. Mallery s.c. gives you large-firm quality for small-firm value, often directly from our shareholder-level lawyers. Our experienced business attorneys will create a customized strategy that meets the specific needs of your partnership. We’re here to answer all of your partnership dissolution questions and help you make the best decisions to set yourself up for success. Contact us today to schedule a consultation.