How to Dissolve a Partnership

Written by carmelo montalbano
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How to Dissolve a Partnership
Don't let a partnership leave you in debt. (

A partnership needs to be dissolved when one or more partners decide to leave the business, the business has expanded and needs to convert into a corporation, the partners agree to disagree, or upon the death of a partner. This is because in a partnership every partner is fully liable for the debts incurred by the other partner in the course of business.

Skill level:


  1. 1

    Take steps to end the partnership quickly once the decision is made. Refer to the partnership agreement for necessary actions to end the agreement. State laws govern most partnership agreements. Remember that in the event of the death of one partner the partnership is immediately dissolved.

  2. 2

    Review a list of all partnership creditors. Notify the creditors that the partnership is being absolved by notice to the state. Any outstanding claims must be resolved by the cash or profits of the company or by the partners themselves. When notifying customers and vendors of the dissolution. tell them whether there will be a new form of operation.

  3. 3

    File notice of dissolution with the state as soon as possible. There will be a waiting time under which the partnership is deemed to be active but in process of dissolution. After this period, usually 90 days, the partnership is deemed to have ended and knowledge of the partnership has been made public to all. Therefore, no additional claims against the partnership may be created.

  4. 4

    Acknowledge long-term contracts still in effect. If contracts were signed for services that extend beyond the termination of the partnership they must be honoured. It is important to negotiate an end to the service or set aside monies to continue to pay for the contracted services. Otherwise, partners may be liable as individuals for outstanding sums of money.

  5. 5

    Hire a lawyer to review the dissolution actions you have taken in case any important details or procedures were not properly completed. This is particularly important if the partnership does not have sufficient assets to redeem all debt and the partners must use their private capital to conclude matters.

Tips and warnings

  • The most important step in dissolution is to write the terms and steps of dissolution in the partnership when the partnership is created.
  • Failure to notify all creditors and have an exit plan will only create personal hazard.
  • Make certain all partners receive notice from creditors that there is no known outstanding balance.

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