A significant percentage of established businesses have partners, and the same continues to be seen in startups. This is because partnerships offer significant benefits.
However, a time may come when a partnership is no longer working, in which case, one may choose to leave the business.
Look at the partnership agreement for an exit plan
A partnership agreement always has an exit clause that discusses aspects that should be observed for the dissolution of the partnership. This includes:
- Period of notice
- How to liquidate assets
- How to pay outstanding debts
- Closing joint accounts
- Filing final tax returns
- Canceling tax accounts and so on.
A partner who wants to leave a partnership should do so based on the agreement they signed for. However, in some circumstances, a partnership can be dissolved without following procedures. For example, a limited partnership will automatically end on the expiry of the term.
Further, a partnership agreement may also have a clause that allows partners to force one to leave the partnership. This is called an expulsion clause. Some partners avoid this clause, but it can help to have one.
Did your partner breach your agreement?
If your partner exited the partnership, but you believe they breached their agreement in some way, you should be informed about what to do – particularly if the ending of your partnership wasn’t friendly.
If you are in a dispute with your business partner over their exit (or exit plan), it may be time to get legal guidance to make the right moves. You want to protect your business from any potential fallout.