How to Resign From a Business Partnership
Business partnerships don’t always work out for a variety of reasons. When one partner loses interest, no longer has the time to commit to the business or reaches the age of retirement, the next step is to resign and legally dissolve the partnership. Resigning from a partnership can involve a number of different steps, depending on how the partnership was originally structured. Although active legal assistance isn’t always necessary, it might be wise for partners to consult with an attorney to ensure the best interests of all partners are protected during dissolution proceedings.
In some cases, step-by-step procedures for resigning from the partnership are outlined in the original partnership agreement. If the partnership agreement includes a resignation or dissolution strategy, review and consider your options. For example, rather than completely resign, you might have the option to become a silent partner. Another option the agreement might include is a provision in which the continuing partner has the option to purchase your share of the business. A buyout would allow you to resign while the remaining partner or partners continue operating the business
Submit a formal, written letter announcing your intent to resign. If there are no provisions in place that will allow the business to continue operating, the partnership will need to be dissolved. After submitting a resignation letter, hold a meeting in which the partners vote to dissolve the partnership. This is also the time to discuss how the partnership will handle present and future liabilities such as business contracts, leases and any business debts. Document, in writing, the results of the vote and any decisions made at the meeting.
Protect your interests by notifying other parties of your intent to resign regardless of whether the business will continue operating or the partnership will dissolve. In some cases, such as with employees and customers, the notification is simply a courtesy measure. In other cases, however, notification is essential and additional actions might have to be taken to remove your name from a rental lease agreement, active business licenses, supplier credit agreement or business loans that include a personal guarantee. If the business will continue operating, the partners may wish to take this step together, but if not you may have to take this step on your own.
If the partnership is dissolving, it’s a good idea to file formal dissolution paperwork whether or not your state requires legal proof of termination. Filing a dissolution of partnership form with the secretary of state or state corporation division legally dissolves the partnership and clarifies that you are no longer in a partnership or liable for its debts. In addition publishing a notice of the partnership’s termination in the local newspaper further clarifies your intent. An advantage to taking this step is that it provides notification to creditors that neither the partnership nor any of its partners can incur new business debt.