When you’re forming a business partnership, the last thing you want to think about is what will happen if one of the partners decides to leave. Withdrawal from a partnership is a critical issue that should be discussed and addressed at the beginning of your business partnership. Waiting until a partner wants to leave to establish how the withdrawal will take place will only lead to complications and disagreements. Partners should discuss and decide what will happen if one wishes to leave when they create the partnership agreement.
If you and at least one other person run a business and you have not formed a corporation or limited liability company (LLC), you have a general partnership. These types of businesses can benefit from having a written agreement laying out the rights and responsibilities of all partners, including what happens if one person leaves.
Partners have the right to establish their own policies and rules. There are much fewer laws in place governing partnerships when compared to LLCs and corporations. However, the New York partnership state statutes will play a role if an agreement is unclear on certain issues. New York partnership statutes exist to fill in terms that are not filled in by a solid agreement.
Here are a few important questions to address when writing a partnership agreement:
• What happens to the business if a partner leaves?
• Can the partner or partners who remain have first right of refusal to buy the partnership interest?
• How will the value of the partnership interest be determined?
• What should happen if there are no buyers for the partnership interest?
Answering these questions in your partnership agreement will help a company stay in business when a partner leaves. It’s possible that your partners will stay with the business for many years to come. Even so, it’s important to establish now what happens in the event of someone leaving. A New York business attorney can help you formulate an agreement and help you follow the agreement when a partner wants to leave. Contact The Internicola Law Firm, P.C. at (800) 976-4904 to discuss your options.
Learn more about avoiding a business partnership dispute by ordering a free copy of The New York and New Jersey Partnership Dispute Guide.