Texans are an entrepreneurial people. The state is home to thousands of different types of businesses. Among the most common of these are general partnerships, in which two or more people join their efforts in order to create revenue. Partnerships are so common in part because they’re so easy to form; you technically don’t even need to file anything with the state in order to have a partnership.
Maybe you decided it would be a great idea to start a partnership with a friend of yours. Over time, maybe you had different ideas of how to run things, and those conflicts eventually grew to the point where it was no longer possible to continue to work together.
Lots of partnership dissolutions end in legal battles. There are certain steps you can take, both while forming the partnership and while dissolving it, to minimize the risk of litigation down the road.
Follow Texas’s business dissolution procedure
There are certain steps you need to take in order to dissolve your partnership as an entity.
If your partnership has business articles, and if they include a set procedure for dissolution, it’s a good idea to follow the procedure you agreed upon exactly to minimize the risk of litigation.
If you filed your partnership with the state at its formation, you must file dissolution paperwork with the state. You must also notify the IRS and state tax agencies of the dissolution.
Distribute partnership assets appropriately
Your first step in the winding-down process should be to pay off any partnership debts. This includes any pay that you owe your employees. The remaining assets should be sold.
Texas law states that a dissolving partnership must distribute assets according to the partnership agreement, if there is one. If there’s not, then they must be distributed proportionally to each partner’s interest in the business.
No matter how careful you are in the winding down of your business, there is always a chance that a lawsuit will arise between you and your former partner. It’s a good idea to consult an experienced business attorney while winding down the business to make sure that the process goes as smoothly as possible, and to make sure you aren’t missing any essential steps.