So, you and your partner have reached the end of the road. This can mean one or both of you are selling, or you’re closing down completely.
Regardless, this is something that you need to navigate carefully because it has legal and tax implications. What are the next steps?
At CSI Accounting & Payroll, we’ve helped small businesses with their finances and structures for nearly 60 years. That means we’ve talked to thousands of business partners who have wanted to know:
- I want to get out. How do I remove my name from my partnership?
- My partner and I want to sell. How do we dissolve our partnership?
- We are closing our doors. How do we dissolve our partnership?
Removing One Partner
If you’ve decided this partnership isn’t right for you anymore, it’s not as simple as just walking away. We encourage you to review your partnership agreement before making any moves.
Your attorney should have included an exit clause that outlines what you need to do. It will typically say you need to either sell your share to your partner or find a different, agreed-upon buyer – and you will have to give your partner proper notice within a specified timeframe.
If you want to move forward, you will need to get in contact with your attorney. They can help you update legal and financial documents to ensure you won’t be tied to the partnership anymore.
It may also be smart to work with an appraiser to help determine the selling price for your portion of the business.
Once you handle your legal and financial obligations, the business has a chance to live another day, and you can be on your way!
Selling and Dissolving the Partnership
If you and your partner plan to sell your business together, don’t jump into it right away! (This is one of the four biggest mistakes we see while selling.)
You can work with a monthly accountant on succession planning to maximize your selling price. This gets the best results over a period of about three years, although some improvements may be seen over a few months.
Then, when you’re ready to start the sales process, you may want to work with an appraiser to get an opinion on what your business is currently worth. (While a monthly accountant can provide an unofficial opinion, this is an appraiser’s specialty.)
If you can’t find a buyer, you’ll definitely need to hire a business broker to help in this area. They can also partner with your accountant to construct the sale agreement.
Then, because you’re dissolving the business, you’ll need to contact your attorney to update legal and financial documents, including dissolution paperwork.
Finally, your monthly accountant can manage your taxes at the end if your sale is profitable!
Closing and Dissolving the Partnership
If you plan to shut down and dissolve the partnership, you’ll need to review your partnership agreement and consult your attorney. They will help you complete your dissolution paperwork and advise you to provide proper notice to any staff members.
Then your attorney or monthly accountant can remove your business’s registration with the Secretary of State and close your EIN and state ID number.
At this point, every loose end should be handled. You may even be profitable in the end, and if you are, your monthly accountant can handle the resulting taxes.
Add a Monthly Accountant to Your Partnership!
Now that you know what to do if you want to get out of a partnership, if you and your partner want to sell, and if you want to close your doors – as well as how a monthly accountant can help with any succession planning, tax registrations, and tax filings – are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what it’s like to work with us by clicking the image below:
