You and your business partner had a good run where you were able to work together productively for many years. However, diverging goals or career stages may eventually bring about a time when the partnership needs to be dissolved. In other business partnerships, the relationship may never truly seem to get off the ground. It may be fraught with distrust or competing interests that make it difficult or impossible for the company to function effectively. Therefore, one or multiple partners may begin to look Into a buy-out.
If you are considering making changes in the ownership structure of your small business or partnership, attorney William Heyman will be able to provide legal guidance and advice. For more than 20 years, Mr. Heyman has advised business owners in Maryland and throughout the United States regarding an array of legal and ownership concerns. From the Heyman Law Office, Mr. Heyman can take a strategic approach to buying a partner out of a business.
First Review the Partnership Agreement
If your small to mid-size business was organized as a partnership, the important pertinent details of the arrangement are set forth in the partnership agreement. A well-drafted partnership agreement will probably already contemplate at least some of the issues you face as part of a business buy-out. However, if you and your partner or partners relied on a form agreement or attempted to draft your own partnership agreement it is highly likely that some important issues were left unaddressed. Thus, the first step in approaching a partnership buy-out is to determined which material issues are covered by the agreement and which issues are unaddressed or otherwise unresolved.
If your organization does not have a partnership agreement or the agreement is deficient, it is highly likely that you will take the default positions set forth in Maryland or the relevant state’s Uniform Partnership Act. Understanding if and how the act applies to your matter is essential.
Consider the Type of Sale of the Business
After engaging in a valuation and provided that the partnership agreement and circumstances allow for flexibility, one should also consider the form of the sale prior to moving forward. Consider the fact that an outright sale of the business is likely to produce the cleanest break. However, parties must have the liquid assets to make such a purchase. By contrast, a gradual sale may permit for a more measured transition and allow the departing, non-managing partner to continue receiving income for a period of time. Thus, within the framework of the partnership agreement, there may be room to negotiate and proceed strategically.
File Paperwork with Maryland and Begin the Wind-Up Process
While partnerships in Maryland are not explicitly required to file documents with the state to give notice that the business is being wound-up, it is often wise to do so regardless. Thus, your intent regarding the buy-out or partnership dissolution is clear. Your notice should identify your entity, your intent to cease operation, and include the signatures of at least two partners.
After providing notice of the partnership sale, buy-out, or dissolution the entity must actually begin the wind-up process. This involves accounting for and handling the organization’s assets and liabilities. Debts must be paid down. Assets may be used to pay down debts or they may be distributed between or among the partners. Furthermore, it is also wise to contact the Comptroller of Maryland to close the entity’s withholding account.
Is your Partnership Registered or Performing Work in other States?
If your partnership is engaged in operations on a nationwide or regional basis, you may need to take additional steps to wind-up your business. If you have registered your partnership in other states, you may need to file a form terminating your right to do business. The failure to take this step may subject you and your entity to fees, costs, and minimum business taxes in the states where your business is registered.
Work with an Experienced Baltimore, Maryland Business Lawyer when Buying Out a Partner
For more than 20 years, William Heyman of the Heyman Law Office has taken a strategic approach to litigation and legal and ownership concerns faced by businesses. To schedule a confidential consultation with Mr. Heyman or another lawyer on the team to discuss your partnership and your goals for a partnership buy-out, call (410) 305-9287 today.