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Written by Keith Tully
My business partner and I are having problems agreeing on finances. I would like to know how to dissolve a partnership.
Ten years ago my friend and I decided to go into business together in a construction venture. We were able to land many projects and became a successful building firm in our area. At first we only had a few small projects, but as time progressed we steadily found ourselves facing progressively larger prospects. However, despite our relative success in business, our personal relationship has suffered and we can no longer function as a team when it comes to making important decisions, especially those concerning finances. We disagree constantly. Since my business partner and I are having problems agreeing on finances. I would like to know how to dissolve a partnership.
Sometimes dissolving a partnership can be a bit of a challenge, especially when those partners are having trouble with finances in particular. However, it seems as though in your case it could be a pretty straightforward procedure according to the Partnership Act of 1890 that regulates this type of endeavour. The one thing you must be cognisant of is that you must stop trading immediately under your current business name.
Secondly, all outstanding business and transactions should be wound up and dealt with according to the percentage of shares you each hold in the venture. Not all ventures are a 50/50 split so this will need to be considered when paying bills and bringing in monies collected from outstanding debts. As well, any person or entity that owes you money or is owed money by you should be notified of the dissolution immediately and no more business can be conducted under the current enterprise.
Besides filing for dissolution of the partnership, it could get tricky especially where taxes are concerned because there are two distinct types of dissolution – technical and general. In a general dissolution the business/partnership would be wound up and simply cease to trade. In a technical dissolution one of the partners continues on (under the same name usually buying out the other) and continues to trade. Taxes and other financial issues can be disputed and lengthy and costly Court proceedings could ensue.
Now then, there are a myriad of legal regulations which should be complied with such as the way in which any assets are liquidated, how payouts to creditors are made, how debts are collected upon and how any remaining profits are distributed. As mentioned, all this can land you quickly in Court if strict adherence to procedure is not followed. We would suggest that you get help from an insolvency specialist at Real Business Rescue to assist you through the process from agreement to dissolve right through the final steps of paying all debts and distributing proceeds.
A quick initial phone call can set you up with a free consultation and save you thousands in the process. Get in touch with us today so that you are not mired in legal entanglements. We can help.
Date: Sunday 20th January, 2013
Published in: General