Partnership Dissolution Template: Everything You Need to Know
A partnership dissolution template is a template for a legal document two or more parties (partners) use in a business partnership to end the partnership. 3 min read
2. How to Use a Partnership Dissolution Template
A partnership dissolution template is a template for a legal document two or more parties (partners) use in a business partnership to end the partnership. This document is also referred to as a "partnership withdrawal," "partnership withdrawal letter," or "partnership withdrawal agreement."
The agreement generates a plan for fulfilling final dissolution steps, such as taking an inventory of business holdings, resolving the business's debts and obligations, and dispersing any remaining assets to the partners. The partnership dissolution agreement simplifies the process of terminating the business relationship by creating a clear timeline, assigning roles and responsibilities for each business partner, and defining the division of business assets in detail. This allows the partners to move on more easily and quickly from the partnership.
Through the formality of the partnership dissolution agreement, partners can be certain that they are not individually responsible for the business's debts and that no partner can involve another partner in any business deals without the full knowledge and consent of the other partners.
The partnership dissolution agreement is particularly important if the partnership did not create an initial partnership agreement or if the initial agreement did not include terms or requirements associated with terminating the partnership.
Types of Withdrawal from Partnership
There are two types of withdrawal from partnership: voluntary and involuntary. Voluntary withdrawal occurs when a partner chooses to leave the business partnership and notifies the other partners. Retirement is a common example of voluntary withdrawal.
Involuntary withdrawal occurs when a partner is removed from the business partnership without their consent. In this case, other partners may provide notice to the partner that is to be withdrawn from the partnership. Death, incapacity, or a criminal conviction, among other things, may be the cause of a partner's involuntary withdrawal.
How to Use a Partnership Dissolution Template
If you would like to terminate your business partnership and want to make agreements with your partners about the process for ending your joint business, use a partnership dissolution agreement document. The process involved with dissolution will vary depending on the reasons why the partnership is dissolving. For all situations, include the following elements in your document:
- Purpose of the partnership: A short description of the partnership, including history, products or services, company size, and market.
- Partner information: Legal names, contact information, addresses, and business roles of each partner.
- Plan for dissolution: The process of how and when the partnership will be dissolved, which includes the date the partnership will stop doing business and descriptions of paperwork that will be submitted to the associated state agencies. For example, you will need to file your certificate of cancellation (also called a "statement of dissolution") with the government agency that you originally registered with. In addition, you will need to inform all suppliers, customers, and clients of the partnership that you will be ceasing business and dissolving the partnership.
- Plan for liquidation: A description of how the business's assets will be handled and liquidated, such as the selection of a partner for gathering, selling, and/or distributing the partnership's assets, and the appointment of an accountant to generate an account statement.
- Division of assets: An outline for division and distribution of remaining assets among partners.
Each partner should have ample time to review the agreement and seek legal counsel if they would like. This reduces the chance that one partner may claim that they did not understand the partnership dissolution agreement's terms. After the agreement has been reviewed, all partners will need to sign and date the document.
However, once the partnership dissolution document is signed, the partnership is not automatically dissolved. It will continue to run until the business has finished the entire process as described in the dissolution agreement, including the settling of debts, ending the official existence of the business entity, and dividing or distributing the assets that remain. Once the process of fulfilling all necessary steps of the agreement has been completed, the partnership will be officially terminated. Individual parties will no longer be responsible for any of the partnership's debts or obligations.
The contents of partnership dissolution agreements vary widely depending on the nature of the dissolution. If you need help with any step of a partnership dissolution, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.