Mega Title: Business Partnership Separation Agreement Template

Mega Description: A partnership dissolution agreement is an agreement that subsists between

two or more partners to bring a business partnership to an end. However, signing the agreement

does not end the partnership automatically.

Definition of a business partnership dissolution agreement

A business partnership dissolution agreement is an agreement that is signed between partners to

terminate the partnership. Hence also referred to as a termination agreement. For it to be valid, it

must be signed by all the partners.

When the object for which the partnership was formed is achieved, a partnership dissolution

agreement comes in handy. It aids in avoiding misunderstandings, settling the existing

obligations of the partners, and planning on the distribution of assets among all the partners. A

partnership dissolution agreement is thus useful when one wants to end a partnership. It also

signifies all partners’ decision to end the joint business.

Further, a partnership dissolution agreement does not immediately end a partnership. The

partnership continues till the partnership goes through the process of settling its debts. It also

stays pending till the business terminates its legal existence and distributes the remaining

company assets. The partnership dissolution agreement is particularly helpful when the

partnership has no original partnership agreement. Also, if the partnership agreement does not

provide the terms for terminating the partnership. Also, a partnership dissolution agreement

clearly outlines the responsibilities, timelines and roles of every partner. This eases termination

of a business relationship.
Additionally, through formally dissolving the partnership, the partners can ensure that they are

not liable for the partnership’s debts. Also, no partner can bind the other partners to any deal

without their knowledge or agreement.

Partnership dissolution

The dissolution of a partnership generally happens when one of the partners stops being a

member of the firm. However, this only applies in general partnerships and no limited liability

partnerships. Dissolution is different from termination and the winding up of a partnership.

Though the phrase “dissolution” could mean termination, dissolution marks the beginning of the

process that eventually terminates the partnership.

In essence, dissolution means the change in relations among the partners. Accordingly, if a

partner resigns or the partnership expels a partner, the partnership stands dissolved legally. Other

causes of dissolution include death or bankruptcy of a partner, a partnership dissolution

agreement, or an event that declares the partnership illegal. For example, if the partnership runs a

gambling casino and gambling is subsequently rendered unlawful. The partnership will then be

rendered dissolved legally. A partner may also withdraw from the partnership thus prompting the

drafting of a partnership dissolution agreement. However, if a partner withdraws from the

partnership in violation of the partnership agreement, the partners could be held liable for

damages. This is because of the unauthorized and untimely withdrawal.

After a partnership dissolution agreement is formulated, the remaining partners could proceed

with the partnership business. However, the partnership will be legally new and different. A

partnership agreement could provide for a partner to leave the partnership without dissolving it

but only if the departing partner’s share is bought by the remaining partners. However, unless the
partnership agreement provides otherwise, dissolutions starts when the partnership is wound up

and terminated.

How to use a partnership dissolution agreement

A partnership dissolution agreement is formulated as the first step in dissolving a partnership. It

creates the timeline and strategy for ending up the partnership. The partnership dissolution

agreement covers various aspects. They include:

 Partnership name. This entails the legal name under which the partnership has been doing

business.

 Purpose of the partnership. This section briefly describes the business that the partnership

has been conducting.

 Partner information. The legal addresses and names of every partner involved in the

partnership are included. Also, the management roles of all partners.

 Dissolution strategy. This section of a partnership dissolution agreement comprises

information on when and how a partnership will be dissolved. This includes the date the

partnership will stop operating and a description of the paperwork that will be filed with

the appropriate agencies. Such include the Department of the Treasury or Secretary of

State’s Office.

 The liquidation plan. This part outlines the process of liquidating the partnership’s assets.

This includes appointing a partner in charge of collection and sale of assets. The section

will also include the selection of accountants to formulate the partnership’s statement of

account.
  Assets division. This section of the partnership dissolution agreement includes how the

remaining assets of the partnership will be evenly distribute and divided among the

partners.

Elements of a partnership dissolution agreement

There are certain core sections that a partnership dissolution agreement should contain and they

include:

 Introduction of Partners

This section should identify the document as a partnership dissolution agreement. The

date on which the agreement is signed should also be indicated and the name of

organization. If there are more partners involved, they should be added.

 Recitals

This part includes the “whereas” clauses and offers the public background information

about the partners. The blanks that should be filled in include:

i) A brief description of the partnership’s purpose.

ii) Total amount of capital invested by the partners in the partnership.

iii) Language of the partnership formation agreement.

 Dissolution

This is the first section and gives details of the partnership’s existence as a legal entity.

In a partnership dissolution agreement template, three blanks are provided. They include

name of the state where the entity is established, name of partnership, and current

principal address of the partnership.

 Winding up
 This is the second section of a partnership dissolution agreement. It provides for the

specifics of the dissolution and explains what assets each partner will assume. It also

apportions liabilities as per the interests of the partners.

 Liquidating partners

This section allows the partners to assign key responsibilities for the administration of

dissolutions tasks.

 Custodian of partnership books

This is a discretionary provision that permits the partners to decide who will be

responsible for the partnership’s records after dissolution.

 Indemnification

As part of dissolution, partners agree to split the assets and liabilities of the partnership

on a pro rata basis. The section ensures no party defaults on the shared obligations.

 Release and discharge

This section indicates that after dissolution, none of the partners can institute a claim

against another for issues related to partnership. The section, however, permits the parties

to institute a suit under the agreement of dissolution.

 Amendments

This section of a partnership dissolution agreement indicates the changes made to the

agreement which must be in writing and signed by all partners.

 Governing law

This section allows the parties to select the state laws that will be used to interpret the

document. However, this does not serve as a venue provision. It does not include the

jurisdiction in which a claim is brought.

  No implied waiver

Even if a party allows another to break or ignore obligations under the agreement, a

party does not waive future rights. Such rights include requiring another party to fulfill

other obligations.

 Electronic Signatures/Counterparts

This section provides that even if the partners sign the partnership dissolution agreement

from different location or use electronic devices like computers, all separate pieces will

be part of the agreement. In the contemporary world, the signatories are often in different

cities let alone different rooms. Such a provision ensures the business runs efficiently

without entirely compromising the agreement.

 Severability

This section protects the terms of the agreement despite one of the parts being

invalidates. For instance, if a state law is enacted hindering the choice-of-law clauses, it

will not render the entire agreement void. Rather, the particular section will be

invalidated and the rest of the sections remain enforceable.

 Headings

Headings and nots at the beginning of every section organize the document and are

considered operational parts of the agreement.

 Entire Agreement

The partners agreeing that the document that they are signing is a partnership dissolution

agreement should be clear. However, the inclusion of this provision will not prevent a

partner from contending the other sections are enforceable.

Process after drafting of the partnership dissolution agreement

Upon completion of the partnership dissolution agreement, all partners ought to sign and date the

agreement and retain copies for their individual records. As earlier stated, the partnership

dissolution agreement does not automatically end the partnership. The partnership continues to

operate till all the necessary steps ate completed.

Further, every partner should have a chance to review the partnership dissolution agreement and

seek legal advice. This lessens the chances of the partners claiming that they did not understand

the partnership dissolution agreement terms. After the agreement is reviewed, all the partners

should sign the document.

Applicable law

The dissolution of a partnership is governed by state law. However, different stated have distinct

requirements to lawfully end a partnership. Some states require that documents such as a

statement of dissolution is completed by the partnership. It is then filed with the relevant state

agencies. Other sates also require that the partnership publishes a notice of dissolution of the

partnership in newspapers of public circulation. The rules and regulations should also be

consulted to ensure the partnership completes all the steps required to dissolve the partnership in

the state where the business is being conducted.

References

https://www.templateroller.com

https://www.simuldocs.com

https://www.legalzoom.com

https://www.wonder.legal
https://www.alexcham.org

https://hmbtx.com

https://www.icsi.edu

https://www.izito.ws/search

https://www.business-in-a-box.com/dissolution