There are various different types of businesses in Pennsylvania that provide many different services and produce different goods. These businesses have various owners as well and are formed as different legal entities. Many are formed as corporations (S-corps and C-corps), LLCs or partnerships. Each are unique and the owners of each have different responsibilities as they are formed, operated and also as they are dissolved.
Partnerships are somewhat unique though, especially if there are only two partners. When one partner retires when there are only two partners, the partnership needs to come to an end as there are no longer partners and only one potential owner. In order to do this, the partnership needs to be dissolved and the partners should know how to do this properly.
First, it is important to file a certificate of dissolution with the department to inform them that the partnership is dissolved. After this, the partnership should only conduct business related to winding up. This could include settling any disputes or litigation, fulfilling any current obligations that the partnership has to any clients, collecting property of the partnership and other activities needed to end the business.
During this period of time, both partners can still bind the partnership based on their actions as part of winding up or for ongoing obligations that began prior to the dissolution of the partnership.
The next step of the partnership is to distribute the property of the partnership. This starts with ensuring that creditors are paid off with the assets of the partnership. If the partnership does not have enough to pay off all their obligations, then each person who was a partner must contribute towards the obligation to ensure it is completely paid off.
Distributing Surplus between Partners
If there is a surplus of property after the creditors are paid off, then the partners shall receive the amounts that they contributed to the partnership as well as any additional surplus in accordance with their percentage of ownership. If there is not enough of a surplus to ensure that the partners receive the amount they contributed, one partner may be required to make the other whole.
There are many partnerships in Pennsylvania, and they will not last forever. At some point in time, a partner may want to retire or move on to a different type of work. When this occurs, the partnership must be dissolved correctly. Experienced attorneys understand this process and can provide helpful guidance for your unique situation.