Forming a business partnership can be an exciting time for business owners, but the reality is that many businesses do not stand the test of time. Your partnership agreement should account for potential changes to your business, including a potential dissolution. A business litigation attorney in Ohio can help resolve any issues that arise during the dissolution process and protect your interests as you close this chapter and move on to future endeavors.
Reasons for dissolution
It is never easy to walk away from a business you and your partner built together. However, there are many reasons to dissolve a partnership. Some of these reasons may include:
- Limited cash flow
- Overwhelming debts resulting in bankruptcy
- Poor management of business
- Disagreements between partners
- Defective products
How does the dissolution process work?
The partnership dissolution process will vary depending on your specific circumstances. However, these are the general steps you will need to take:
- Refer to partnership agreement: For most partnerships, the dissolution process is detailed in the business’ partnership agreement. If you do not have written agreement, it is best that you give written notice to your partner about your desire to leave the partnership.
- File for dissolution, if necessary and cancel business licenses: You do not need to file forms with the state of Ohio to create a partnership, but you may choose to do so. If you initially filed forms to with the state, you will need to file dissolution papers with the state in order to end the partnership. Under Ohio Rev. Code Sec. 1776.65, a partner can file a Statement of Dissolution, indicating the end of the partnership. You will also need to cancel any business licenses you have by filing the necessary paperwork.
- Notify tax agencies and deal with creditors: You will need to file any final tax forms that need to be filed and mark the checkboxes necessary to indicate to the IRS that it is the last time you will be filing a return on behalf of the business.
- Collect money owed to business and sell and distribute assets: You will also need to inform creditors that your business is dissolving and settle any claims that come in from creditors. Once you have settled your creditors’ claims and collected money from anyone still owing money to the company, you will have to divide up the remaining tangible and intangible business assets. These assets may include stocks, equipment used in the business, and trademarks.
Dissolving a business partnership can be challenging, but a business attorney can make sure you handle things the right way.