Business partnerships may end for several reasons. Perhaps you have accomplished everything you set out to do and you are ready to move on. Other situations may prove to be more complicated.
Regardless of the reasons behind your partnership dissolution, you will need to follow required legal steps to make the dissolution official. You should follow these steps carefully to ensure your interests remain protected throughout the dissolution process.
If you have a written agreement, follow its instructions
You do not need a written agreement to establish a partnership in California. However, if you and your partner have created a partnership business formation document, your agreement may also provide details for dissolving the partnership.
When you do not have a written agreement, the California Revised Uniform Partnership Act outlines the steps to dissolve your partnership. You will also need to file a formal dissolution with the state of California.
Notify any interested parties
You should reach out to any parties who may be impacted by the change to your business, including customers, suppliers and creditors. You may satisfy this requirement either by mailing out individual notices or through a published notification.
Once you and your partners have agreed to the dissolution, you will need to take steps to close, or “wind up,” the business. These steps may include:
- Completing any works in progress
- Selling assets
- Paying outstanding debts
- Distributing leftover assets to partners
You should also resolve any remaining tax issues and address potential out-of-state regulations.
Protect your interests
Whether the end of your business relationship is friendly or contentious, following the steps outlined by the law can help you protect your interests while you focus on the path forward. You should seek assistance if you are dissolving your partnership. The steps are somewhat different depending on the type of partnership you have formed.