Does the End of a Business Partnership Mean the End of Your Business?
The end of a business partnership can be just as painful—and expensive—as a divorce. In the best-case scenario, both parties knew the arrangement was a temporary one and planned to part ways eventually. In many cases, though, the partnership fell apart in a way that fractured the personal relationship forever. However, terminating a business partnership doesn’t have to mean the end of your business journey. With careful planning and strategizing, you can protect your business, pivot, and forge a new path. Navigating the end of a partnership in Southern California requires a careful approach and the help of a business attorney. Call the Law Offices of Robin D. Perry & Associates at 562-216-2944 to set up a consultation with our team now.
Hopefully, you know why your partnership is dissolving. Clear communication is always best practice in this situation, but it doesn’t always play out quite that easily in real life. Common causes for the end of a business partnership include one party wanting to retire, engaging in illegal activities, changing their career priorities, having different goals for the business itself, or disagreeing with the other partner on critical business decisions.
Planning Ahead is Always the Best Option
The worst time to address the end of a business partnership is when the relationship is actually ending. In an ideal world, all business partnerships would clearly outline the terms of any termination in their initial partnership agreement. Too many partnerships never address this possibility in their early business planning because they assume they will be in business together indefinitely. A strong partnership agreement will account for one party leaving the business, passing away, or becoming disabled and unable to work.
This is more advice for those who have not yet embarked on their business partnership. If you’re well beyond that stage, you will need to prepare to dissolve the partnership in a way that is fair and equitable to all involved parties. Seeking guidance from a knowledgeable business advising lawyer can ensure that the process is conducted fairly and following legal requirements, protecting the interests of all parties involved.
Securing Fair Dissolution Terms
Both parties must be treated fairly when a business relationship ends. This is where many business owners struggle. If a partnership is ending because one party was engaging in illegal behaviors, failing to pull their share of the weight, or otherwise not contributing to the business, it’s hard for the remaining partner to feel like buying them out and paying them their share of the company.
Important topics you’ll need to discuss with your business partner include the allocation of business debt, transferring the business into your name, and distributing the business assets. This isn’t as much of a struggle when a business is profitable and has lots of liquid assets. But when a business is just starting to get off the ground or is bouncing back from a period of significant financial losses, buying out the other party may be impossible. It’s important to talk about your next steps with a business advising attorney who can help you explore different options and fulfill your end of the bargain.
Handling Tax Issues
Before a partnership officially terminates, consider the tax implications and ensure that you have tied up any loose ends in this area. You may need to file your final tax return as a partnership, consider any tax issues that arise with buying out the other party’s share, and file necessary paperwork with the IRS. Assuming you have a CPA who handles your business accounts, they can help you navigate this part of the process.
Navigating the Next Steps in Your Business
Be prepared for a significant shift in your business as you regain your footing as a sole owner. You need to address the end of the partnership with employees, clients, and others with a stake in your business. It may be helpful to review your business plans and change them to accommodate what you can handle as a single owner. If your business leaned heavily on the departing owner’s strengths and professional experience, look into transitioning out of those areas and refocusing on areas and services that capitalize on your own strengths. If paying out the ex-partner’s share of the business assets left you with few liquid assets, it’s important to ensure that your business can fulfill its payroll obligations and other expenses.
Trust the Law Offices of Robin D. Perry & Associates With Your Business Advising Needs
Wherever you are in your business, it’s never the wrong time to consult a business lawyer. We can help you meet all local, state, and federal regulations and plan for different potential issues you may face. Learn more about how we can help by calling us at 562-216-2944 or getting in touch online.
Attorney Robin D. Perry has been part of the Long Beach Community for over 25 years handling business litigation, employment litigation and advising, criminal defense, personal injury and code enforcement defense for businesses.
