How to bring a Partnership agreement to an end


You may want to consider making a few different agreement in relation to how to end your business partnership or Limited Liability Company.


Entering into a partnership business or a limited liability company poses several risks which may result in the breakup of a partnership if not done correctly.

One or more of the partners could lose interest in the business and no longer feel committed to it, problems could emerge that cannot be solved, or the business venture simply could not work out.

But chances are you signed a Partnership Agreement before you and your partner(s) entered into this business. As you leave the company, it is important to know how a partnership agreement can be broken. That could result in buying out the shares of another partner or simply completely ending the company.

You may take other actions that will end a business partnership and terminate a partnership agreement.

Agree to end the Partnership

If your partner(s) have lost interest but you have not, or vice versa, one partner may purchase the shares of the other partners or you may sell your shares if you no longer want to be a partner in the company. Agreements can and should be created to help protect you and your family in this situation while forming a partnership

Buy-Sell Agreement

A buy-sell arrangement sets out explicitly who can and can not buy into the company if you or your partners decide to sell out, claim personal bankruptcy or in the event of death, divorce or disability.

Under such an arrangement, the remaining business partners are shielded against unwanted business partners or estranged spouses who want to be part of the company. It also stops feelings from interfering with decision-making.

New Dissolution

If you and your partner want to put an end to the business venture all together, creating a partnership dissolution agreement will help you decide on the terms of the partnership dissolution–particularly if the partnership’s original written partnership agreement did not clearly set out the conditions for the partnership’s end.

A separation agreement explicitly lays out each partner’s duties, deadlines for terminating the partnership, and positions each partner will perform in the process. Creating an agreement to terminate the relationship does not end the partnership immediately.

You would still have time to settle any debts, end the business legally and divide the assets of partnerships and partnership property.

Statement of Dissolution

Once you and your partners have agreed on how the terms of company dissolution and all dissolution proceedings have come to an end, you will file a declaration of dissolution.

The guidelines for completing a dissolution statement vary from state to state, so it’s important to follow the format set out for the state your business is located in.

Many states require companies to file a statement of dissolution before notifying creditors and settling claims while other states require that the statement of dissolution be filed afterwards.

Some states also require tax clearance, which ensures that all back-taxes must be charged before filing a dissolution statement.

Cause and Effects

It is never easy to reach the decision to split, and account must be taken of the effects of the move. Where everyone wants to end their business trip on a good note, the opposite also holds true.


“When a partnership is broken the partners can’t just take money and property from the partnership,” says Stephen Fishman, JD, Southern California Law School University.

“Instead, the assets of the company must be liquidated…, an accounting made and the funds used to cover all remaining partnership debts, including those owed to the partners.” Fishman noted that outsourced creditors must first be compensated, and if anything remains, it is allocated to the partners.

“If the partnership does not have sufficient capital or properties to cover its debts, the individual partners would have to pitch in and pay it out of their own funds,” he added.


For all these purposes, when dealing with company or partnership dissolution, it is always in the best interest of a business owner or firm to consult with an attorney or consultant who is experienced in commercial law. Understanding what to expect will give you more power to make decisions, and the ability to move forward.

Komolafe Timileyin is a passionate entrepreneur that loves to solve entrepreneurial issues. He is also a blogger and an upcoming Engineer.

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