Ending your Florida business partnership will involve a variety of tasks. Here’s a brief overview of the process for dissolving or terminating a general partnership in Florida. This article covers general partnerships where there is no specified term (at-will partnerships) and where the dissolution is by the mutual, voluntary decision of the partners.
1. Review Your Partnership Agreement
As with the most important matters affecting your partnership, the first step in dissolving a partnership is to check your partnership agreement. While a written partnership agreement is not required in Florida, ideally, you and your partners would have prepared a partnership agreement when you first formed your partnership or at some later point in time. If you don’t have a pre-existing partnership agreement, you’ll have to fall back on the default provisions of the state’s Revised Uniform Partnership Act.
Along with reviewing the partnership agreement, it’s a good idea for all of the partners to discuss the dissolution. Two of the key points to address are:
- paying outstanding partnership debts, and
- how remaining partnership assets, if any, will be divided among the partners.
If you have a well-written partnership agreement, it should provide guidance on these points. You may even be able to simply follow what’s laid out in the agreement. On the other hand, there may be cases where you’ll want individual partners to pay particular debts, and those responsibilities will not be covered by the partnership agreement. If so, you’ll now want to come to an agreement about who will pay what and put that agreement in writing.
2. Take a Vote or Action to Dissolve
Assuming you have a partnership agreement and it contains provisions on how to dissolve, you should follow those provisions. In most cases, dissolution provisions in a partnership agreement will state that all or a majority of partners must consent before the partnership can dissolve. In such cases, you should have all partners vote on a resolution to dissolve the partnership. Ideally, there will be the unanimous or majority consent required by the agreement. You should record in writing the results of the vote to dissolve.
If you want to dissolve your partnership because of a disagreement among the partners, and not all the partners are in agreement regarding dissolution, you usually have a couple of options. First, the partnership agreement may provide a solution. For example, there often is an option for partners who want to continue the business to buy out one or more partners who want to leave. Or you could bring in an independent mediator to try to help resolve the disagreements. Ultimately, however, if the partners can’t come to an agreement after trying other options, you’ll have to fall back on going to court and getting a judge to decide how the dissolution will proceed. You should try to avoid going to court, but if you really have no choice, you and your fellow partners should be represented by lawyers.
If you don’t have a partnership agreement, you’ll have to rely on the Revised Uniform Partnership Act. In general terms, the Act provides that an at-will partnership will be dissolved if any partner decides to leave the partnership (unless the remaining partners elect to continue the partnership without the dissociated partner).
Read Our Latest Blog Post
Funding freemium technology focus equity bootstrapping usernce niche market.
Seed round agile growth hacking retur investment alpha investor advisor marketing pitch.
3. File a Form With the State
In Florida, general partnerships are not legally required to file a form when they dissolve. However, to help make clear that your partnership has ended and limit your liability, it’s a good idea to file a Statement of Dissolution with the Department of State’s Division of Corporations (DOC). A Statement of Dissolution must provide the name of your partnership and state that it has dissolved and is winding up its business. The form must be typewritten or printed legibly in English. The Statement must be signed by a partner or other authorized person. Whoever files a Statement of Dissolution must promptly provide a copy to any partner not involved in the filing (any non-filing partner).
You can use Form CR2E070, Statement of Dissolution for Partnership. Blank forms are available for download from the General Partnership Forms section of the DOC website. There is a base filing fee of $25. Under Florida law, other people generally are considered to have notice of the partnership’s dissolution 90 days after filing the Statement of Dissolution.
4. Pay Debts and Distribute Assets (Wind Up)
After you have voted to dissolve under the rules of the partnership agreement—or, in the absence of an agreement, the partnership has dissolved under the rules of the Partnership Act—you need to take some additional steps to close down the business. These steps are often referred to as winding up the partnership. In general, the steps include:
- completing any partnership work in progress
- selling some or all assets (if the partners want and have agreed to do so)
- paying debts and
- distributing any remaining assets to the partners.
It’s particularly important that all debts are paid before you make any distributions to the partners. Florida’s Partnership Act has rules for the order in which people get paid when winding up a partnership. In general, creditors must be paid first; then, partners are entitled to receive back their capital contributions, and, finally, if anything remains, the partners are entitled to distributions.
5. Notify Creditors, Customers, Clients, and Suppliers
While not a legal requirement, you should make sure to notify creditors, customers, and others that your partnership is dissolving. In some cases, if one of your partners makes a deal with someone after dissolution, you and your fellow partners could be on the hook for that deal—including any debts involved—if the other party didn’t have notice of the dissolution.
There are several options for how to give people notice of the dissolution. One option is to send them a written notification. Another good option is to publish a notice in one or more local newspapers.
6. Final Tax Issues
Florida does not require that you obtain tax clearance before dissolving your partnership. However, you must notify the Department of Revenue (DOR) that you are closing your business. The DOR prefers that you submit this information using their online system. The system also can be used to close a sales tax account, reemployment tax account, and other business-related tax accounts.
For federal tax purposes, check the “final return” box on your IRS Form 1065. Under IRS rules, if your partnership terminates before the end of its normal tax year, the final federal return is due by the 15th day of the fourth month following the termination date.
7. Out-of-State Registrations
Is your partnership registered or qualified to do business in other states? If so, you must file separate forms to terminate your right to conduct business in those states. Depending on the states involved, the form might be called a termination of registration, certificate of termination of existence, application of withdrawal, or certificate of surrender of right to transact business. Failure to file the additional termination forms means you’ll continue to be liable for annual report fees and minimum business taxes.
You can find additional information on the DOC website and the DOR website. For information on dissolving and winding up partnerships formed in other states, check ThelawQ.com’s 50-state series on dissolving partnerships.
Dissolving and winding up your partnership is only one piece of the process of closing your business. For further general guidance on many of the other steps involved, check ThelawQ.com’s 20-point checklist for closing a business and the ThelawQ.com article on what you need to know about closing a business.
We can help you with the legal issue that you’re facing; feel free to email us any legal queries, and we will answer it for free. Our email address: email@example.com and website: thelawq.com