An unstable economy can effect the stability of a general business partnership. Sometimes, the relationship becomes unpredictable. Typically, partnerships involving more than one owner often change as a business matures and grows, but the nation’s economic woes have changed the landscape. Several businesses have closured or become bankrupt, and many people are going through personal bankruptcies.
When a business partner leaves, the legal bond is broken. This break is known as a partnership dissolution. This begins the process of terminating the partnership.
The business may continue, though, but under a couple conditions. The first is if the partner was in the wrong, for instance, he or she was fired due to misconduct or violation of the partnership agreement. A second condition is if the original partnership agreement allowed for the continuation of the business without the partner.
If you choose to continue a business on your own as the sole proprietor, you’ll need to buy all of the departing partner’s remaining or outstanding ownership interest; or the departing partner can sell his interest to a single third-party buyer.
Several decisions are made during these dissolutions, but be sure to be mindful of tax consequences, such as the continued use of the employer identification number and taxpayer identification number.
Photo Credit: tungphotos