Business partnerships can sometimes be one of the most challenging types of business agreements. Over time, many partners have finally asked themselves what possessed them to choose the other person to do business with. If you and your business partner have jointly decided that it is time to resign and close shop, follow these guidelines to ensure you are following the letter of the law.
How to dissolve a business partnership
Different states have different laws governing how a business partnership must be dissolved. If you are unsure of the laws in your state, check with the secretary of state’s office in the state in which your business is located. Some states require that you obtain special permission or authorization from your state tax board to ensure all outstanding state taxes have been paid.
You will also need to cancel any permits or licenses issued by the state or county. Allowing a third party to operate under your sales permit or trade name may make you liable for additional taxes and penalties. Also, if you have been operating under a fictitious or assumed name, you will need to file an “opt-out” request. Your local county clerk’s office will advise you of the appropriate paperwork to complete.
Financial concerns when dissolving a business partnership
The fact that you are dissolving the business and ending the partnership does not mean that you do not have to make any tax payments due. The IRS will especially look for the last payroll tax payment, so make sure you do it on time.
Notify your creditors in advance that you will close your doors and pay final bills on time. Do not leave any outstanding debt. You want to end the business on a positive note, so be sure to notify your customers and vendors in a timely manner as well. Even though the deal is going out of business, you want to stay on good terms with everyone you’ve done business with, as you may do business with them again in the future.
Lastly, be sure to save your records and keep them neatly organized in case you need to refer to them in the future.
