Even the best business partnership isn’t guaranteed to last forever. Sometimes conflicts of interest arise between entrepreneurial collaborators—or one person decides to pursue a new path. Much like a marriage, when these situations occur, it’s in everybody’s best interests to part ways. When “divorcing” your work partner, you need to take certain steps to stay within the bounds of business law.
How to Separate From Your Business Partner
1. Consult Contracts
Check your partnership agreement to see what it requires for dissolution. For instance, the majority of board members may need to consent. Having details regarding such an exit specified in shareholder and operating agreements from the start can save a lot of grief at this point.
2. Look for Solutions
Ideally, you won’t have to turn to litigation to dissolve your partnership. The process is costly, and the enterprise may suffer, as rumors of lawsuits and internal strife inspire distrust. Say, for instance, your business partner wants to leave because they feel they do most of the work—you could change the partnership agreement, so they get a larger share.
3. Pay Debts & Distribute Assets
If you dissolve the partnership, you’ll have to tie up loose ends financially. For instance, will you buy out your partner to obtain full ownership? Do they have outstanding business debts to transfer? In some cases, it’s easier to dissolve the business entirely, paying off creditors and liquidating assets. Leftover funds are then paid back to the partners relative to their ownership stake.
4. Notify the Authorities
While it’s not legally required in every state, it’s smart to notify the proper authorities of any dissolution of business or change in structure. Further, regardless of where you live, check the “final return” box when filing taxes with the IRS afterward.
5. Enlist a Business Law Attorney
A lawyer can help you address the above steps, from drawing up dissolution paperwork to filing relevant documents with the authorities. If the company’s breakup hits any roadblocks and litigation is needed to achieve your aims, a business law attorney will handle the case.
For help with business law issues in Grant County, WI, turn to the team at Scott & Heenan LLC. The legal professionals have 50 years of combined experience, with roots in the community dating back to 1999. They provide effective and affordable services to their clients. Get an overview of their practice areas online. To meet schedule a consultation with a seasoned attorney, call (608) 348-9506 today.