Professional partnerships are often bound by legal agreements or contracts. Although it is not always the case, these contracts should have a dissolution clause that helps the partners in case the partnership is ending. If the partners need to create a separate dissolution agreement, they must outline a set of reasonable, legal and fair procedures that both must follow in the dissolution procedures.
Assets and Liabilities
The dissolution agreement needs to address the partnership's assets and liabilities. Simply dissolving the professional partnership does not mean the assets can be kept and the liabilities will automatically disappear. The partners must pay off the liabilities or divide them amongst the two. The assets must also be divided, unless they legally belong to one of the partners. For instance, one partner may have brought an asset into the business as a start-up asset entity. The original partnership contract explains who legally has the right to the asset and he is legally entitled to get it back in partnership dissolution.
Although the partnership is dissolving, the ownership rights will remain active. The ownership covers any passive income the company continues to make from book or product sales, for example. While the ownership may have been divided equally during the business operations, the ownership rights can change after the dissolution as long as both partners are in agreement.
Closing a business or dissolving a partnership requires several steps. This can include firing the existing employees, finishing existing projects and contacting the department of commerce and the Secretary of State in the state where the business operates to notify the departments of the business changes. Several other procedures can be applicable depending on the partnership in question. Each partner is assigned a list of responsibilities that must be completed during the dissolution process.
The partnership dissolution agreement provides details about both partners, including their names and contact information. Both partners need to sign the dissolution agreement once they have agreed to the terms and procedures for dissolving the partnership. If the dissolution agreement is not meant for immediate use but simply to establish a procedure in case it needs to happen, the agreement must contain two additional sections. The first section needs to explain what will happen if one of the partners dies while the partnership is actively operating. The second additional section outlines the procedures if one of the partners wants to sell his share to the other partner or a new partner.
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