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David H. Schwartz Oct. 23, 2020

Statistics have shown that approximately 70% of business partnerships eventually fail. Entering into a business partnership involves several risks. If these risks aren't properly managed, it could lead to the dissolution of the partnership. Protecting your interests in a partnership dissolution is important to avoid personal liability.

If you are considering dissolving a partnership, it is crucial to consult with a knowledgeable business litigation attorney for proper guidance. Attorney David Schwartz is committed to providing experienced legal guidance and comprehensive representation to business owners and partners in dissolution matters. Mr. Schwartz can assess your unique situation and help you understand how to protect yourself from personal liability using applicable laws.

The Law Offices of David H. Schwartz, INC. is proud to serve clients throughout San Francisco, Oakland, Santa Clara, Alameda County, San Mateo, and the San Francisco Bay Area of California.

Common Reasons for Dissolving the Partnership

Partnership dissolution is the process of terminating a partnership legally and the cessation of all its business operations. Common reasons for dissolving a partnership include:

  • A change in the market (business isn't sustainable)

  • Death or retirement of a partner

  • Change in one of the partner's goals or desired direction

  • Mixing personal relationships with business

  • Unequal commitment among partners

  • Declining revenue or lack of success

  • Differing values, disagreement over the business vision or long-term goals

  • Personal disputes between partners

  • Disagreement over how the business should be managed

  • Failure to trust

Where these factors exist, one or both of the partners may wish to dissolve the business relationship.

The Process of Partnership Dissolution

The process for dissolving a partnership in California, as indicated by the California Revised Uniform Partnership Act (RUPA), involves:

Reviewing the Partnership Agreement

When partners decide to end the partnership, the first thing is to review the legal partnership agreement created during the business formation. This will help ensure that the protocol outlined in the document for dissolving the partnership is followed. The rules of RUPA will apply if there was no partnership agreement at the time of dissolution.

Voting to Dissolve

A major step like partnership dissolution requires the consent of the majority, if not all, of the partners. Partners to the business must approve the dissolution through a vote.

Winding Up

Once the partners have voted to dissolve the partnership, they must take additional steps to close down the enterprise. These include selling business assets, paying remaining debts, and distributing remaining assets to partners.

Filing a Formal Dissolution 

Filing a formal partnership dissolution with the state of California makes it clear that the partnership has ended, thus limiting your liability.

Notifying Concerned Parties

According to California law, creditors, suppliers, customers, and other concerned parties should be notified of the partnership dissolution. They may be notified through a written notice or a notice published to the general public.

Resolving Taxes and Other Issues

Partners will need to file a final federal tax return and pay any state taxes that are due. Also, partnerships that are registered to do business in other states must file separate dissolution forms for each state.

Important Tips

The following are some important things to remember when dissolving a partnership:

  • Always hire an attorney for detailed guidance and to protect your interests

  • Take your time to review all partnership agreements and documents

  • Give a written notice of dissolution to vendors and clients

  • Assess existing agreements and consider how the dissolution will affect them

  • Have the dissolution agreement notarized or witnessed

  • Publish a notice of the partnership's termination

Failing to properly administer the dissolution, can result in undesirable and costly liability.

How Experienced Legal Counsel Can Help

Dissolving a partnership often involves a lot of complexities. Steps such as reviewing the partnership agreement, filing the dissolution form, notifying creditors, and settling and closing out all accounts can make the process even more complicated and overwhelming. Although you may have the best intentions, overlooking crucial steps may end up exposing you to personal liability, debts, or other issues. Thankfully, a knowledgeable California partnership dissolution attorney can protect your interests and offer you detailed guidance.

For more than 45 years, Attorney David H. Schwartz has been handling legal matters pertaining to partnership dissolution. Mr. Schwartz can help you file the dissolution form, settle taxes with the IRS, close out all accounts, and publish a notice of the partnership's termination. Using his extensive experience, he can walk you through the entire business dissolution process and help you navigate key decisions. He will evaluate your particular situation and determine how applicable laws can help protect you from any potential personal liability.

Contact the Law Offices of David H. Schwartz, INC. today to schedule a one-on-one case evaluation with an experienced California commercial litigation attorney. Attorney David H. Schwartz can offer you the experienced legal guidance and advocacy you need in your partnership dissolution. Mr. Schwartz proudly represents partners and business owners throughout San Francisco, Oakland, Alameda County, San Mateo, Santa Clara, and the San Francisco Bay Area.