As you started your journey to owning a business, you may have needed to form a partnership.
Unfortunately, nearly 70 percent of partnerships eventually fail. If you find yourself in that situation, California law has established steps for you to follow.
1. Review the partnership agreement
If you have one, check the partnership agreement for any clauses or terms regarding dissolution. If you and your partner did not include any related inclusions, such as how to buy out your partner, you will need to follow the dissolution process outlined by the California Revised Uniform Partnership Act (RUPA).
2. Take action to dissolve
Depending on how your company, you may need to have the partners take a vote regarding dissolving the partnership. If unable to get a majority of consent votes, dissolving the partnership will likely require legal action.
3. Begin winding up
If the majority agrees to the dissolution, you then start the process of winding up. These vital steps involved closing the business in its previous form. Winding up includes completing work in progress, selling assets, paying debts and distributing any remaining assets.
3. File dissolution with the state
If you have filed a formal partnership agreement, you should also file a formal partnership dissolution. Filing this form with the state ensures the clarity of the dissolution and limits your liability.
After completing these initial steps, the process still takes time. Ensure you also notify concerned parties, properly complete state and federal taxes, and file any out-of-state dissolution forms.
