What Happens to Partnership Assets on Dissolution?
Most legal cases do not have much entertainment value; only lawyers and law students would be interested in reading summaries of the courts’ decisions about them. The kinds of cases that make for viral news stories and bingeable documentary series tend to fall into a few categories, such as criminal cases, divorce proceedings, and inheritance disputes. Business partnership disputes are also sometimes newsworthy, especially when the business or its partners have already been in the public eye; who can forget when the former members of the band Pink Floyd had a court battle about which of them had the right to use the band’s inflatable pigs in their stage shows? While you might not be famous, and while your business assets probably do not include inflatable pigs, dissolving a business partnership and dividing the company’s assets can be expensive, acrimonious, and stressful. A Whittier civil litigation lawyer can help you dissolve your business partnership and resolve disputes related to the distribution of the company’s assets.
The Newly Dissolved Business Pays its Outstanding Debts
The most common reason for the dissolution of business partnerships is that the business is consistently losing money. Therefore, when the partners dissolve the company, the business owes outstanding debts. Upon dissolving the business, the partners liquidate the assets that belonged to the business and use the money to settle as many of the company’s debts as they can. If the business is a defendant in a lawsuit at the time of the dissolution, then the liquidation of its assets can be used to pay the judgment in the lawsuit.
The Partners Follow the Instructions Set Out in the Partnership Agreement
The best business partnership agreements include procedures about how to dissolve the business, including what to do with the company’s assets upon its dissolution. This is one of the reasons that it is a good idea to hire a business law attorney when you are incorporating a business, even if you are confident that nothing can go wrong. If there are any assets left after your defunct company pays off its debts, your partnership agreement should contain instructions about how to divide them.
One Partner Buys Business Assets From Another
Dissolving the company so that it ceases to operate is not the only way that a business partnership can end. In some instances, one business partner buys out the other’s share in the company. In those cases, the partner who is leaving the company receives a sum of money equal to a certain percentage of the value of the business, and the company, with its remaining partners, keeps the rest of the assets and continues to operate.
Contact the Law Offices of Omar Gastelum About Dissolving a Business Partnership
A civil litigation lawyer can help you resolve disputes related to the dissolution of a business partnership and the liquidation of its assets. Contact the Law Offices of Omar Gastelum and Associates APLC in Whittier, California to set up a consultation.
When a business partnership dissolves, the company liquidates its assets and pays its debts, but in some cases, one partner buys out another partner’s share of the business.