Platform Overview

How to Dissolve a Partnership

Introduction

If you are currently in a business partnership and looking to move on by terminate or dissolve that relationship, this article will guide you through that process. The dissolution of a partnership relies on either the reason for terminating or the partnership agreement in place. Refer to this earlier article which outlines What is a Partnership Agreement?

In general, there are a number of ways you can dissolve a business partnership. These are listed on the Department of Industry, Innovation & Science government site:

  • Partnership term as stated in formal partnership agreement has expired
  • One partner gives written notice to the other partner to exit the partnership
  • One or both partners can no longer legally own a business
  • There is a court order
  • Death of one of the partners
  • The business has gone bankrupt or insolvent

Partnership Agreement

The first step to take when deciding to dissolve a partnership is to look at the existing Partnership Agreement you have in place. This may include the terms around how to dissolve the existing partnership. If that is clearly outlined in the agreement, then that process must be followed with the help of a company lawyer. They will give you more guidance around the particular clauses that had not been recognised beforehand. In addition, the legal advice will give a step by step process of terminating the partnership.

If you do not have a partnership agreement in place then it will turn to the corresponding state’s legislation.

Expiry

  • If the agreement expires as per the terms of the document, then the partnership ceases at that date.

Notice

  • Giving written notice to all other partners of your intention to leave is enough. If there is no specific date then the dissolution begins on the date of notice being given to the other partners.

Incapacity/Court Order

  • A partner can apply to the court for an order to dissolve the partnership. These can be in cases of incapacity or unsoundness of mind. In addition, if an event causes the partnership to be illegal then that will dissolve the partnership.

Death/Bankruptcy

  • Similar to notice, the partnership automatically dissolves from the date of bankruptcy or death.

Conclusion

Starting this process often involves a substantial amount of work to meet all obligations both legal and financial in nature. Often including completing income tax returns, capital gains tax, financial records and paying any outstanding entitlements. It is best to consult a lawyer who can focus in each area from our Lawpath directory.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

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