Dissolving Partnership Without Agreement
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FAQ
Court Action If you don't have a management agreement in place that can facilitate one partner buying out the other, a deadlocked disagreement between partners can end up in court. A disgruntled partner can bring a civil suit to force a buyout or to wrest control of the business from another partner.
No partner has a right to an asset used by a partnership. As such, on dissolution of a partnership, without a written agreement, any assets will be sold and the proceeds used to pay off any partnership debts.
If there is no written partnership agreement, partners are not allowed to draw a salary. Instead, they share the profits and losses in the business equally. The agreement outlines the rights, responsibilities, and duties each partner has to the company and to each other.
Partnerships are unique business relationships that don't require a written agreement. However, it's always a good idea to have such a document.
Take a Vote or Action to Dissolve In most cases, dissolution provisions in a partnership agreement will state that all or a majority of partners must consent before the partnership can dissolve. In such cases, you should have all partners vote on a resolution to dissolve the partnership.