Legal steps to dissolving a partnership
This guide sets out the main steps to consider before, during, and after dissolving a partnership, follow these steps with a solicitor from Orwins by your side for a stress-free dissolution.
Step 1: Assess if you have a written Partnership Agreement
If there is no written partnership agreement, any partner can usually end the partnership without notice.
Ending a partnership without notice often leads to disputes, especially over assets and liabilities; therefore, speaking to a solicitor before this occurs can help you and your partners reach a fair agreement to prevent any conflict.
If you have a partnership agreement, review any dissolution clauses with a solicitor to make sure you meet your obligations too.
Step 2: Consider all alternatives before dissolving
Before ending the partnership, we recommend considering whether changing roles or responsibilities could resolve the issues.
If you decide to dissolve the partnership, follow the correct legal and practical steps.
Step 3: Notify relevant parties
Once you decide to dissolve the partnership, let everyone you do business with know as soon as possible. This includes:
Customers
Suppliers
Any relevant regulatory bodies
At this point, stop doing business in the partnership’s name.
Step 3: Deal with assets & liabilities
When dissolving a partnership, assets and liabilities are usually distributed in accordance with each partner’s ownership share and the terms of the partnership agreement.
There are a number of legal requirements that must be followed when:
Liquidating assets
Collecting debts
Distributing profits
Because of the intricacy involved, competent legal advice should always be sought before taking these steps.
Step 4: Reviewing contracts & agreements
Review any contracts, leases, or agreements with our solicitors.
Some contracts may continue after the partnership ends, creating ongoing obligations. Checking these early can help you avoid problems later.
Step 5: Inform HMRC
After dissolving the partnership, tell HMRC within 30 days to avoid a penalty.
If your partnership is not VAT-registered, notify HMRC through your partnership tax return.
If you are VAT-registered, update your details through your VAT online account.
Why legal assistance is crucial when dissolving a partnership
Dissolving a partnership can be tricky, and if not handled according to the law, disputes can escalate and sometimes end up in court.
To prevent this, seek legal advice early; a good solicitor can guide you through the process, help you meet legal requirements, and reduce the risk of disputes.
