Splitting up Your Business Partnership in Kentucky
Starting a new business is an exciting proposition, especially with a partner or business associate. But few things last, and sometimes a partnership has to be dissolved. It’s never easy. How does the split work? Will the business have to be completely dissolved? Are the partners amicable? What needs to be filed? Sometimes the questions are overwhelming, and the best and safest course of action is to get legal help.
Contact Us With Questions
For questions or to set up a consultation about splitting up a business in Kentucky, contact Bunch and Brock, Attorneys at Law online or call us at 859-254-5522. With an office centrally located in Lexington, Bunch and Brock has more than 35 years of experience and the knowledge and resources to help with all your legal needs. We are well-versed in the nuances of Kentucky law, especially with businesses.
What to Do
Just as it was necessary to follow steps to create a business, it is also necessary to take certain steps to dissolve one. Some of them include:
Just like with some marriages, many people enter into business deals with what is essentially a “pre-nup.” This means that the partners had the foresight to prepare for the eventuality that the partnership may not work out. This agreement stipulates the specific ways in which the business will be broken up if one or more of the partners decide to exit the business, or if all the partners decide to simply end the business. If this is available, the business can simply be split up according to the agreement – for example, if one partner is leaving, whether he needs to buy out, walk away or any other eventuality.
Vote to Dissolve
If a partnership agreement exists, there should be procedures or actions in place to dissolve the business. The first step is essentially a vote, especially if there are more than two partners. The agreement should stipulate whether the major decisions must be approved by a majority vote or whether the decision must be unanimous. If there is no partnership agreement, it is an excellent idea to retain legal counsel, as state laws for dissolving a company apply. According to NOLO, a legal publishing site, this means in Kentucky, under Kentucky’s Revised Uniform Partnership Act, a partnership may be dissolved if one partner declares he no longer wishes to be a part of the company, unless the remaining partners want to remain in business without him (in this case it becomes necessary to legally find a way to equitably remove/reimburse the partner who is leaving).
Dissolution of a partnership does not require the filing of forms under state law; however, it is a good idea to do so for legal reasons in the event that disagreements arise in the future.
Once the agreement to split the partnership has been agreed upon and forms filed for legal reference, NOLO suggests paying debts and distributing assets. In this case, to close means paying outstanding debts, and if the business is closing, to sell assets and split the returns among the partners.
If this has not already been done, businesses associates — including customers, creditors, and others involved in the business — should be notified of the partnership’s dissolution or change in structure.
Finally, in Kentucky, it a good idea to close state tax accounts (if the business is closing). To do so, it is necessary to fill out a form 51A205.
For more information, go to: NOLO
It is always a good idea to split a partnership as amicably as possible. It simply makes life easier for everyone involved, and could help avoid legal proceedings in the future. To this end, the Huffington Post interviewed several business professionals with experience in closing businesses and asked their advice. The consensus answers included:
- Be Generous – This helps avoid legal issues and can potentially save thousands of dollars in litigation costs.
- Be Reasonable – Acting logically and not emotionally may help make sure the dissolution is as quick and clean as possible.
- Share Fees – Counsel is beneficial to everyone. Splitting the legal fees is a good way to keep everything equal.
- Communicate – Find mutually beneficial goals, and work toward them.
For general information and statistics about Kentucky Businesses, go here: Kentucky Small Business Statistics
For more than 35 years, the attorneys at Bunch and Brock have been serving our community and the entire state of Kentucky with their legal needs. We don’t just serve the community – we are members of it, and we look forward to helping our neighbors when they need us. If you have bankruptcy or business law-related questions or would like to set up an appointment, contact us online or call us at 859-254-5522.