What Is Dissolution of Partnership New York?
The dissolution of partnership New York happens when a partnership registered in New York state is terminated.3 min read
The dissolution of partnership New York happens when a partnership registered in New York state is terminated. The Internal Revenue Service (IRS) recognizes partnerships as a type of business entity. Dissolving a partnership can be done for any number of reasons. Some partnerships only form for a certain period and simply dissolve once they are no longer necessary.
What Is a Limited Partnership?
A limited partnership is a type of partnership that offers some of its partners limited liability protection, which isn't afforded to the partners of a general partnership. Each limited partnership is required to name at least one of each of the following types of owners:
- Limited partners
- General partners
Limited partners can only be held liable for the debts of the partnership up to the amount that they initially invested in the business. They also don't typically take on management roles in the partnership.
General partners are involved in the daily ins and outs of the company. In addition, they are held fully liable in case of any legal or financial issues with the partnership.
Partnerships can come in different shapes and sizes depending on the goals of the owners and how many there are.
Forming a Limited Partnership in New York
New York partnerships are governed by the state laws in place for businesses that form in New York. Each state has different requirements for forming and dissolving different business structures. Therefore, all business owners should check the Secretary of State website to look over the necessary steps.
Limited partnerships forming in New York must file a certificate of limited partnership. They'll send the document to the Division of Corporations under the New York DOS (Department of State). The information required for this certificate includes:
- Partnership name
- Partnership address
- Names and signatures of general partners
- Dissolution date
Dissolving a New York Partnership
To dissolve a partnership in the state of New York, you'll need to follow the steps laid out in your partnership agreement.
Usually, partnerships are dissolved because of some sort of dispute among the partners in the business. Even if the partners didn't officially form a contract with one another, they did form a legal relationship in which they have obligations to one another and the business. The partners in a partnership should always be acting in the best interest of the company and the other partners when making business decisions.
Dissolving a partnership can be a difficult and even an emotional process, as business partners in smaller business structures are usually friends. It's important to be careful that emotions don't get wrapped up in the dissolution and that everything is handled professionally.
Look Over Your Partnership Agreement
Before making any major decisions regarding a partnership, the partners should always look over their partnership agreement. A partnership agreement should be prepared as the partnership is being formed to make sure all the partners agree on the goals of the business and their roles in it.
If the partnership agreement has provisions included for the dissolution of the business, the whole process will likely go more smoothly than it would have otherwise. The purpose of such provisions is to prepare the partners for such a situation and to help them handle it with care.
In case the partnership agreement does not cover handling a dissolution, or if there is no agreement at all, the partners will defer to the regulations partnership laws put in place in New York. There are also partnership dissolution templates available online to help ensure no important aspects are missed.
Specific elements of the dissolution should not go overlooked, such as:
- Handling any remaining debts the business has.
- Distributing the remaining profits of the business among the partners.
Vote or Take Action to Dissolve
Usually, all the partners must vote and have a majority approval before they can take action to dissolve a partnership. Some partnership agreements state the vote to dissolve must be unanimous in order to be able to go through with it.
In some cases, not all the partners will want to end the partnership. Therefore, other partners may be able to buy out those who would like to leave. If the partners cannot come to an agreement regarding the dissolution, they can choose to take it to court and have a judge decide their course of action.
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