A business partnership is a good method for creating an organization during the start-up phase. Unfortunately, it can also be a source of conflict. Attempting to merge two, or more, different personalities in an effort to create a phenomenally successful company means there will certainly be some disagreements. Starting with a well-drafted partnership agreement in place at the outset serves as an excellent tool for resolving disputes and provide a guide for the partners in moving forward. In the event an agreement is not put in place, however, there are a number of things to consider should conflict come.
Settling Dispute Among Partners
First, explore options for settling the dispute among the partners. In some cases, the parties are able to solve the problem and move forward, even in the absence of a formal partnership agreement, and without the involvement of a small business attorney.
Memorialize Any Changes
Whatever the resolution agreed upon, it is important that the partners memorialize any changes in their various expectations as well as any change in the structure of their business. You may choose to change the weighting of the partnership, shifting one partner’s responsibilities toward decision-making or financial control and allowing a partner to remain on board or become a silent partner. Or, one partner may decide to sell their share in the company, either to the other partner(s) or to a third party. Another option is to reorganize and create a new type of entity, such as a C Corporation. Or the company may be dissolved altogether.
Consult a Small Business Attorney
If dissolution of the partnership is unavoidable, a small business attorney can guide the partners through the process to ensure that the partners receive their fair share of any distributions of assets and that their continuing liability to the partnership and third parties is minimized. It typically takes about 90 days or longer to dissolve a partnership.
Before you file your paperwork, consider contacting a small business attorney to ensure all agreed upon and legally required obligations have been fulfilled, your business has been valuated, and all leases, contracts, and loan agreements have been reviewed so you understand how dissolution affects them as well the tax reporting for the partnership and the partners. Contact the attorneys at Gehres Law Library today for more information.