Although all partnerships start with great intentions and the hope for success, there are many circumstances when a partnership does not work out. It can be a dispute between partners, lack of profit, or a myriad of other reasons why a partnership must dissolve. If there is a partnership agreement, generally the partnership agreement will control the dissolution of a partnership. As discussed in my previous blog entry, a partnership agreement is essential when forming a partnership; however, if you are at the point where dissolution is imminent or has already occurred, it is too late to execute a partnership agreement.
It is important to note absent a partnership agreement, a partner is jointly liable for all debts of the partnership. In addition, each partner is personally liable for the debts of the partnership. A creditor against the partnership can seek a judgment against you personally or against your personal assets. If you filed a Statement of Authority with the California Secretary of State, you must file a Certificate of Dissolution which puts all parties on notice that the partnership is dissolving. It is always a good idea to file a Certificate of Dissolution because a general partner can continue to bind the partnership after you think the partnership has dissolved. In addition, you should cancel licenses, permits, and Fictitious Business Names in order to wind down down the partnership.
Often times there may be continuing obligations after a partnership has dissolved, so all continuing obligations under a contract should be reviewed to determine how to proceed and how it should be divided. At the time of dissolution, all partners should have access to all contacts and leases to determine what liability, if any, exists.
If you have questions regarding dissolving a partnership or need assistance in winding the partnership down, please contact Attorney Anthony Marinaccio at (818) 839-5220 to set up a free initial consultation.