1. What Is a Partnership?
2. Dissolving General Partnership in California Without a Specified Term
3. Dissolving General Partnership in California Without a Specified Term
4. Reasons for Dissolving a Partnership
5. Dissolving Partnership Under Business Law

Updated November 11, 2020:

Wondering how to dissolve a partnership without an agreement? You will need to follow the provisions under the Uniform Partnership Act in the state in which your partnership is registered and operating.

What Is a Partnership?

A partnership involves at least two legal persons, such as individuals, corporations, or groups, that are operating a business for profit.

Dissolving General Partnership in California Without a Specified Term

The first step in going through the process of dissolving a partnership is looking at any agreement you and your partner(s) created as part of the registration of your business. If you do have any type of agreement, it may outline the terms of dissolving the business. However, if you didn't create any agreement when forming the business, the provisions found in your state's Uniform Partnership Act will become the default for the dissolution process.

A partnership agreement is not a requirement in some states, such as California, but it is recommended for all partnerships to prepare some type of written agreement when forming the business or later when the business is in operation.

When reviewing the agreement, the partners should also discuss a plan for dissolving the business in the future. This discussion should include a review of how the partnership would 1) divide any remaining assets held by the business between the partners and 2) pay all outstanding business debts.

Dissolving General Partnership in California Without a Specified Term

When dissolving a partnership in the state of California, the first step is figuring out how you will wind up the business. This process involves taking certain steps to close the business and resolve any outstanding debts or liabilities. If you have a partnership agreement that outlines how the dissolution will take place, you will follow the plan as outlined. The partners must vote to dissolve the business and then begin taking steps to wind up.

You may then need to file a form with the state in which your partnership operates. A form is not required in the state of California, but you likely filed Form GP-1, or the Statement of Partnership Authority, when the partnership was formed. This form would have been filed with the Secretary of State. You would also need to notify any suppliers, clients, customers, and creditors of the plan to dissolve. This step isn't legally required but is important to make sure everyone involved with your partnership is aware of the dissolution.

You may choose to send a written notice of the plan to dissolve. Another way to inform people of the dissolution is to publish a printed notice in a local newspaper.

Reasons for Dissolving a Partnership

A partnership may need to be dissolved for several reasons:

  • The retirement of a partner
  • The bankruptcy of a partner
  • A lack of interest in one or more of the partners in maintaining a professional relationship

Dissolving Partnership Under Business Law

It's important to discuss the plan to dissolve with all partners involved in the business and come up with a plan and terms upon which everyone can agree. You'll have to consider many different factors when going through the dissolution process. When partners can't agree on the terms or plan, it may be smart to hire a third party to assist. Another option when those involved can't come to an agreement is to apply for a dissolution that the local court orders. However, that route is expensive and may not provide an equitable or fair solution.

Even when a partnership agreement includes dissolution provisions, it's still important for all partners to go over any issues related to the plan to dissolve, such as handling outstanding business debts and obligations. If any of the issues that arise become more complex, you may want to hire an attorney to help create a dissolution agreement that resolves the problems and meets all partners' needs.

Along with reviewing the partnership agreement, you will need to review the business laws in your state since the dissolution process of a partnership is governed under state regulations and laws. If your partnership received any capital contributions, the funds should be returned to the contributors. Additionally, all remaining assets must be distributed to the partners based on ownership interest.

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