Ending a business partnership is a difficult decision, but sometimes, unfortunately, it is necessary. The process of making it happen is also complicated, so it is important to know the steps that lead to a successful completion.
If you have reached the point of dissolving a business partnership in Arizona, it is best to follow these steps and the guidance of a business law attorney for a smoother, less stressful experience.
Review the Partnership Agreement
First and foremost, it is necessary to review your partnership agreement to move forward with ending a business partnership. It is not required to have a formal written contract in Arizona, but most partnerships do to protect all parties involved.
Well-written agreements should include:
- An outline of dissolution protocol, including how to resolve disputes
- A clause that requires a majority of votes or written permission from all members
- Any other requirements imposed to dissolve the partnership
Discuss Debts and Asset Distribution
You and your business partner (or partners) need to discuss any financial obligations, such as outstanding debts and future liabilities. It may help to outline a plan on how to pay them, such as through cash resources available or by selling the business. Paying creditors in Arizona is legally required before dissolving a business.
After those debts are paid, any remaining assets should be distributed accordingly, based on the varying partnership ownership shares. And all bank accounts tied to the business should be closed and settled.
File the Dissolution Paperwork
It is not legally required to file dissolution paperwork with the state, but it is a good idea for your business’s sake to do so. It can help give closure to any issues involved in the partnership.
By filing a Statement of Dissolution with the Arizona Secretary of State, an inexpensive service, this act will cancel any existing Statement of Partnership Authority that might be on file.
Notify Other Parties and Finalize Tax Issues
Before ending a business partnership, it is also an important step to notify any other parties involved in your business, including your commercial landlord, customers, employees, and government organizations that issued you a business license, like the IRS.
While a tax clearance is not required before dissolving your business, if you were using the state’s Transaction Privilege Tax (TPT), or sales tax, you must cancel it with the Arizona Department of Revenue. When the final partnership income tax is filed, check the “Final Return” box on IRS Form 1065.
Do You Need Help Ending a Business Partnership?
If the idea of ending your business partnership in Arizona seems overwhelming, you’re not alone. The team of experienced business attorneys at the Law Offices of William D. Black will walk through the steps needed to take together with you to make sure you are upholding all of your legal obligations.
Dissolving a partnership can be especially complicated if there is a dispute or multiple issues involved between partners that are holding up the process. Let us alleviate the situation, make sure the process is conducted in a proper manner, and ensure that your personal interests are protected.