The winding up of a business partnership is a process which occurs upon a general dissolution. It ensures all creditors receive their dues, as well as paying anything owed to remaining partners. In this way, it is similar to the liquidation of an insolvent company or one that has ceased trading.
Why does winding up occur?
There are a number of reasons why the winding up of a partnership might occur. It is especially common following the death or retirement of a partner (if there is no agreement to the contrary), or cases of partnership bankruptcy .
Once the partnership is dissolved, all its financial and material assets are liquidated, and debts from clients or partners are recovered. In very simple terms the resulting funds are then used to pay creditors and settle any liabilities of the business. The surplus funds are then distributed between partners. Your partnership agreement can also contain provisions for prioritising certain partners during winding up and deal with how the winding up process is to be managed.
If you know your partnership is coming to an end, initiating dissolution and voluntary winding up may be advantageous.
How to wind up your partnership voluntarily
If you decide winding up your partnership is the best option for your situation, follow these simple steps to ensure it goes as smoothly as possible:
- Before winding up, check the ownership status of anything you value. Items or property that is owned by the partnership including assets purchased in the name of the business will be liquidated. Contact a professional for assistance in this scenario.
- Study your partnership agreement in detail. Does it contain any provisions or instructions for winding up? Are there any unexpected conditions that will result in an unfavourable outcome for you?
- Obtain legal advice. Winding up can be a tricky and laborious process, so ensure you know what processes to follow and how to best manage the process.
Winding up is of course a troubling prospect for a partnership, but with the right advice and support, you can avoid many of the unfavourable consequences. Contact the solicitors at Ralli Partnership Law for advice on winding up a partnership advantageously.