Dissolution is the start, not the end
In a partnership, dissolution generally begins a winding-up period rather than ending the business on the spot. During that period the partnership finishes pending work, collects what it is owed, pays its creditors, and distributes what remains. What triggers dissolution depends on the partnership agreement and on the governing statute. Under New York's partnership law, a partnership with no fixed term or particular undertaking can often be dissolved by a partner's express will, although leaving in violation of an agreement can create liability. Limited partnerships and LLPs have their own rules and filings, so the first step is confirming exactly what kind of entity you have.
Debts, assets, and the accounting
Ending the relationship among partners does not end the partnership's obligations to outsiders. Creditors can usually still look to the partnership, and in a general partnership to the partners personally, for debts incurred before dissolution. Partners should give notice to clients, vendors, and lenders so that the business is not bound by new obligations someone else takes on in its name. Among the partners, the settlement typically involves an accounting of contributions, draws, profits, and losses, so keep bank statements, tax returns, capital account records, and the communications about any withdrawals. Moving partnership funds or clients unilaterally while terms are being worked out is often what turns a separation into litigation.
Negotiated exit or court supervision
Many partnership dissolutions are resolved through a buyout, in which one partner continues the business and pays the other for their interest, or through an agreed liquidation. When partners cannot agree on value, on who keeps clients or the business name, or on whether someone took more than their share, a court action for an accounting and a supervised winding up may become necessary. Our starting point is the partnership agreement, if there is one, along with the kind of entity involved, the business's assets and debts, and what each partner wants to keep. From there we outline whether a negotiated separation is realistic and what it would take.
