What Are the Options When a Partner Chooses to Leave a Business?

 Posted on September 29, 2022 in Business Law

There are numerous reasons why partners who have built a business together may choose to end their partnership and go their separate ways. If partners have encountered disagreements about the direction of their company or the way it should be managed, they may no longer be able to work together, and a "business divorce" may be necessary. However, the end of a partnership does not always occur because of conflict. In some situations, a person may decide to strike out on their own and pursue different opportunities, or they may wish to retire and leave the business in the hands of someone who will be more involved in operating it. 

If you are a business owner, it is important to understand your options if another partner chooses to leave your business. Depending on the type of business entity you have, there may be different procedures that need to be followed. In Florida, it is important to ensure that the correct steps are followed when a partner dissociates from a business.

Dissociation From a Partnership

If you have a partnership, a partner may dissociate from the business, or the partnership may be dissolved. In the event of dissociation, a statement of dissociation must be filed. The partner who is leaving the business will no longer have the right to participate in the management of the business, and their duty of loyalty to the business will no longer apply. The partner's ownership interest in the business will need to be valued, and arrangements will need to be made for the other partner(s) to purchase these interests.

If the partnership will need to be dissolved, this can be done by mutual agreement of all partners. All partners must sign a dissolution agreement and file a statement of dissolution. In these cases, each partner's ownership interests in the business will be evaluated, and partnership assets will be distributed according to the partnership agreement. If there is no partnership agreement, then the assets will be distributed equally among the partners. 

Dissociation From an LLC 

While similar procedures will be followed when a member dissociates from an LLC, the business will usually be able to remain in operation while being owned by one or more remaining members. The terms of the LLC's operating agreement will generally be followed, as long as the agreement allows a dissociation to occur. In these cases, the agreement may specify that the remaining members will purchase the departing member's ownership shares. Dissociation will terminate the departing member's right to participate in the management of the business. If they transfer ownership of their interests in the business to someone other than an existing member, that person will not be able to participate in the management of the business, unless the operating agreement states otherwise. It is also important to note that the dissociation of a member will not remove that person's obligations to repay any debts they owe to other members or to the business itself.

Contact Our Oakland Park Business Law Attorney

As a business owner, it is important to understand your options in cases where a partner chooses to leave the business. Depending on the type of business entity you have, there may be different dissociation or dissolution procedures that will need to be followed. At The Elliot Legal Group, P.A., we can help you determine the right procedures to follow, and we will ensure that you meet all legal requirements while working with you to find solutions that will protect your interests. Contact an experienced Dania Beach business partnership lawyer at 754-332-2101 to get the legal help you need with these or other business law matters.

Sources:

https://www.business.com/articles/how-to-dissolve-partnership-agreement/

https://www.floridabar.org/the-florida-bar-journal/anatomy-of-a-business-divorce-florida-llcs/

http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0600-0699/0620/Sections/0620.8603.html