An ordinary partnership can be dissolved by any of the partners at any time and the process doesn’t require all the partners to agree. Notice of termination can be served by one or more partners or a simple agreement can be reached. A Dissolution of partnership deed can be used to properly wind up the partnership and divide any assets or liabilities - this also applies to LLPs and limited partnerships (see below). Partners must publicise the dissolution. This can be done by writing to any relevant parties (eg customers or suppliers) and advertising in the relevant Gazette.
Automatic dissolution takes place if:
- a partnership was formed for a specific term or project which has concluded
- one or more partners dies or goes bankrupt
- it becomes illegal to carry on the business of the partnership
In certain cases, a partnership can be dissolved by court order (eg if one partner successfully complains that another partner is incapable of performing their part of the partnership contract).
In a general partnership, when a partner decides to leave, the partnership is also dissolved. If you want to carry on the business partnership, you will need to have someone replace the departing partner and buy their share of the business. The very nature of a partnership is that it must consist of two or more partners.
Alternatively, partners who desire to remain in business after a partner leaves can establish buy-sell agreements when first forming the partnership. A buy-sell agreement allows the remaining partners to buy the ownership rights of the departing partner. A buy-sell agreement serves as a binding contract that details the conditions regarding when a partner leaves the partnership. Buy-sell agreements may include information concerning the price to pay when a partner is bought out, who is able to buy the partner’s ownership rights and which events can result in a buyout. A buy-sell agreement is advantageous for a company because it allows the partners to possibly keep the business afloat while experiencing a critical transition. The agreement is binding, so it can serve as evidence if partners find themselves in court because of legal issues regarding the partnership.
If you want to void the partnership agreement, this will also dissolve the business. Therefore it's not recommended to do this if you want to carry on the business.