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How to get out of a failing partnership

On Behalf of | Nov 22, 2022 | commercial litigation

Due to the costs of starting a business, many entrepreneurs choose to develop partnerships, where the partners share the costs, responsibilities and profits of the company. However, if you do not choose the right partners, you may experience unexpected problems.

Like many other individuals, you may seek a way out of a challenging partnership with unresolved issues. These are some strategies for getting out of failing partnerships.

Review your partnership documents

Your partnership agreement may have clauses that facilitate the end of your partnership. For example, you may have a voluntary exit clause or redemption provision. You may have to fulfill specific conditions, and you may have to take less of a payout for your ownership of the company.

Walk away

You can also walk away. You will likely lose all your investment in the company. You may also still risk liability for future company debts and other liabilities, however. If you choose to walk away, take your name off of any loan, credit card or other outstanding accounts. You should go so far as to close existing accounts.

Negotiate your exit

One of your best options is to speak with your partner and discuss your exit. Negotiate the price of your shares of the company and create a formal exit document. You may also have to speak with your creditors to get them to release you from any liability regarding the company’s outstanding debt. Also, contact your lessor about your lease. You may also still be responsible for any tax burden incurred prior to your release.

If all else fails, you can pursue a dissolution in court. You can achieve a more equal division of assets and debts, but you will pay legal and court fees for this resolution.