Partnership Dissolution Agreement

Every dissolution agreement of partnership template shall include information about the appointment of a liquidator. This is a person who shall be responsible for winding up the partnership.

A liquidator could be one of the existing partners or a neutral third party. Under a partnership dissolution agreement, a liquidator shall have the right:

• to sell business assets;
• to collect outstanding receivables;
• to use the proceeds to pay off debts, etc.

Neither federal nor state law requires or provides any information regarding a liquidator’s compensation. Therefore, it is up to the parties of a partnership dissolution agreement to decide how a liquidator’s compensation shall be paid, if any. If, however, the partners decide to pay, there are several available compensation models they can pick from:

• a fixed lump sum;
• a regular allowance (weekly or monthly);
• compensation of incurred expenses (e.g., transportation, printing);
• any other arrangement.

A well-drafted dissolution agreement of partnership template shall appoint an accountant for a liquidation process. An accountant shall be in charge of all financial aspects related to winding up the business. The accountant’s responsibilities shall include preparation of final financial statements, tax filings, and ensuring proper valuation of assets.

The account could be:

• one of the partners, provided he or she possesses the necessary financial and accounting background;
• professional accountant or accounting firm.

According to the local legislation of most states within the United States, a notice of a partnership’s dissolution shall be published in a local newspaper. Such a publication is needed to inform third parties that a partnership ceases to exist. This might be particularly important for creditors, clients, or other interested parties.

Such a notice shall be published in all local newspapers within the state where a partnership mostly conducts their business. The same clause should be incorporated in the text of a final dissolution agreement template.

Usually, the text of a partnership dissolution agreement appoints a liquidating partner who shall be in charge of making such a publication.

The most essential component of every sample partnership dissolution agreement is an allocation of remaining assets, if any. Once the partnership settles all debts and obligations before their creditors and third parties, certain assets may remain. Those assets may include cash, vehicles, equipment, other movable property, and even IP rights.

Therefore, the partners shall decide how exactly those remaining shall be distributed between them. And here there are few options:

• First, all remaining assets could be split up between the partners in equal shares.
• Second, the remaining assets could be divided pro rata to each partner’s contribution.
• Third, in any other way agreed upon by all partners.

Partners shall keep in mind that if the original partnership agreement provides a specific way of allocation of remaining assets in case of liquidation, then such way of allocation shall be used.

A good partnership dissolution agreement sample should also take care about allocation of any remaining liabilities. Basically, the parties may use the same allocation methods as for the distribution of remaining assets. It is a good business practice to include an indemnity clause to protect each partner from post-dissolution claims.