A partnership is a business in which two or more people share ownership and contribute to the business being carried out. A partner sometimes decides to leave the partnership for various reasons, perhaps because they no longer want to commit to the business they are in or want to retire. Sometimes, a partner wants to start his own opposite business. Leaving a partnership requires planning and working with the partner left behind.
Step
Part 1 of 2: Preparation To Go
Step 1. Get the partnership agreement document
The partnership agreement must have been drafted and drawn up prior to the formation of the partnership. This agreement defines the division of authority and responsibility of each partner, and describes the terms and procedures if a partner decides to withdraw from the partnership.
- Look at the "sale-purchase" agreement. This agreement will define the conditions that a partner must meet before resigning. For example, a sale-purchase agreement might specify the price the partnership would pay to purchase shares of a partner, who might purchase the shares, and what circumstances could trigger the purchase.
- If you no longer have a copy of the partnership agreement document, ask one of the partners to copy theirs, or obtain a copy from whoever is designated as the partnership records supervisor.
Step 2. See a lawyer
You must see a lawyer if you want to leave the partnership. An experienced business law attorney can help you understand state or territory laws and the limitations of a partnership agreement. To find an experienced business attorney, visit the website of the attorney association in your area, which is sure to provide referral or referral services.
- Be sure to see your own attorney, not a partnership attorney. A lawyer is sworn in to be loyal to his client. If a partnership has its own attorney, it is the attorney's responsibility to be loyal to the partnership, not to you.
- Therefore, you should also get your own lawyer if a dispute arises between you and another partner.
Step 3. Assess the business conditions
Before talking to other partners about wanting to leave the partnership, you should consider the business situation and conditions of the partnership. For example, you should consider any contracts, mortgages, liens or other personal agreements involved.
- Also consider how much the partnership business is worth. If a partnership is dissolved, the partners will get a share of the assets and debts according to the ownership interest in the partnership.
- You can request that the partnership be assessed for value. Do this by hiring a business valuation service, online. However, be aware that hiring someone to assess the partnership business will indirectly signal to other partners that you want to leave. It's a good idea not to make them suspicious until you've really made up your mind.
Part 2 of 2: Leaving the Partnership
Step 1. Discuss your departure with the other partners
If the partnership agreement does not specify the terms of the departure, talk to the other person. For example, you can agree to sell your stake in the partnership business or agree that another partner can buy your stake in the business.
You can also agree to stay in the partnership but change the weight sharing in the partnership agreement. In this situation, you can get a majority share in the partnership and the ability to make decisions on your own, while the other partner is in a secondary position. Otherwise, it's you who retreats to a secondary position
Step 2. Consider mediation
If you have difficulty getting agreement with other partners regarding the terms of resigning, consider using mediation services. With mediation, all parties involved meet with a neutral third party (the mediator). The mediator's job is to listen to the dispositions of all parties and help reach a mutually agreeable solution. The mediator has no right to decide cases or give opinions about who is right or wrong.
Local courts can run a mediation program. Call them to make sure. A mediator often sets the fee between IDR 900 thousand and IDR 5 million (exchange rate of IDR 13 thousand) per hour. Although at first glance it looks expensive, it is still much cheaper than the cost of a prolonged trial
Step 3. Remove your name from liability records and other documents
If you have an identified contract or other document stating that you personally underwrite the partnership, remove your name from the agreement before leaving the partnership. If your name cannot be removed from the contract, you are still considered a personal guarantee, even though you are no longer a partner.
- Removing your name from the contract is not easy to do. The partnership must execute a new agreement, and this time without you as guarantor.
- Furthermore, other partners may not want to release you from obligations. In this situation, you should hire an attorney to help negotiate a solution with the partnership.
Step 4. Make a separation agreement
This agreement confirms everything that has been agreed between you and the partnership regarding your departure. This separation agreement must include the following:
- How to dispose of assets.
- How to remove your name from the list of obligations.
- Price and payment method for your share in the partnership.
- Compensation for future lawsuits arising out of the partnership.
- Right to audit partnership books. This is especially important if you are being paid money over a certain period of time.
- A material violation clause is included to anticipate if the partnership is unable to fulfill its obligations.
- The right of security (security interest) to cover debts or obligations that you cannot get rid of.
Step 5. Dissolution of the partnership, if necessary
If you can't come to an agreement with the other partners on how to leave the partnership, consider legally dissolving the partnership. The dissolution process is governed by state law and usually requires all parties to equally share all debts and assets of the partnership.
- Taking care of the separation usually requires those involved to fill out a dissolution or separation statement, with the relevant regional secretary. Generally it takes 90 days to terminate the partnership.
- In California, partners can complete a Statement of Dissolution with the Californian Secretary of State.
- The dissolution of a partnership does not necessarily mean that the business is also finished. Other partners can still continue their business operations as a partnership. If the partnership consists of only two people, the business structure must be reorganized, for example as a limited liability company.
Step 6. See an accountant
There are no direct tax-related consequences in dissolving a partnership. However, the tax burden may be accrued in advance, especially if the partnership property increases in value. After that, you should also consider consulting a professional accountant or tax expert.
You should also notify all tax-related authorities to confirm that you are no longer part of the partnership. In addition, if you cash out any investment in the business, it may be considered a taxable event
Step 7. Notify others of the dissolution
You must notify all clients, customers and distributors that you have left the partnership. Send the letter and keep a copy for archives.
