How to Peacefully Leave a Partnership in Florida

How to Peacefully Leave a Partnership in Florida

When you and your partners first started out, you might have imagined that you’d spend the rest of your lives working together. Unfortunately, real life is rarely so easy. Sometimes partners fall out with one another. Other times a partner will just want to take their life in a different direction. Either way, someone is looking to leave a partnership, and it’s important to do it right.

Of course, it’s better to avoid these kinds of situations altogether. For advice on selecting the right business partner, click here.

Voluntary Withdrawal vs. Non-Voluntary Withdrawal

The first factor to consider before planning to leave a partnership is whether the withdrawal will be voluntary or non-voluntary. Essentially, this is the difference between leaving the partnership of your own free will and being forced out. Partners who decide to withdraw typically do so for personal reasons, whether they are finally ready for retirement or simply wish to pursue a different line of work.

Non-voluntary withdrawals tend to happen under harsher circumstances. In this situation, the withdrawing partner has no say in the matter – the other partners want them gone, and that is that. Common triggers for this event include bankruptcy, a breach of partnership duties, and incarceration. There are, however, more reasons for a non-voluntary withdrawal than criminality. For example, when a partner passes away or becomes incapacitated, the remaining partners might have no other choice but to “force” the other from the company.

Your Exit Strategy

There is no one-size-fits-all exit strategy for withdrawing from a general partnership. The scale of your business, its structure, and your partnership agreement should all be considered before action is taken. You should also check to see if there are any debts that you could be held liable for, too. In Florida, most general partnerships can be exited from with a written notice of withdrawal. If there are complex assets or other complications involved, however, then you might need to invest a little extra work before parting ways.

The Importance of a Partnership Agreement

Hopefully, you and your partner(s) have a Partnership Agreement. It’s times like these when they are most useful. A well-written Partnership Agreement will contain provisions for withdrawal, dissolution, and how to go about transferring interest should someone leave a partnership. Be sure to read these provisions carefully to ensure that you are in full compliance. This is because some Agreements will require the partners to spend a specified amount of time with the company before they can leave. The Agreement might also call for a partner to give advanced notice before they control. These kinds of provisions exist to protect the other partners from the damages of an unexpected exit. If you withdraw without following these terms, then you might find yourself liable for those financial damages.

For more on what goes into a strong Partnership Agreement, read more here.

Dissolution of the Company

The dissolution of the company is something to keep in mind if you plan to leave a partnership with only two owners. This is because partnerships cannot consist of only one person. In these situations, the company is dissolved unless the remaining partner chooses to instead operate as a sole proprietorship. If you have a Partnership Agreement, then you should review it for terms covering potential dissolution. Such terms might call for a vote to be taken before the company can be dissolved and will often lay out how the remaining assets will be distributed. For partnerships involving three or more people, however, it is common for the exiting partner’s interest to be assigned to the remaining partners instead of dissolving the company outright.

Leaving Without Bad Blood

Whether voluntary or involuntary, it’s smart to try to leave a partnership on a good note. This means communicating clearly and respectfully to your partners, no matter what disputes may have brought you to this place. The fewer bridges you burn when you leave a partnership, the better.

Looking to start a business or grow your current business? Contact FL Patel Law today by visiting our website or calling 727-279-5037.