Modifying a Partnership ?

[Mzbebe14]

What is the name of your state (only U.S. law)? Oklahoma
My friend and I of 14 years formed a partnership in Nov 2014. The nature of business is retail clothing. There have been many issues running the business together that made me realize this is a horrible decision and I strongly don't think we can run a company together. However- I want to find a positive resolution and I don't want to lose what we've established so far- for either party. My solution is this: Can we work under the same brand name - as two separate entities. I.e. She has her own store location, her own tax id, merchandise, credit lines, bank accounts, etc. And I have mine? Would this be considered a franchise or Limited Partnership? My main concern is liability. I don't want to be held liable for anything on her end. I also want to make sure neither party is entitled to or have access to the other party's finances in any form.

Currently we have a small amount of debt and a small store worth of equipment and merchandise. I would assume we either agree on who takes what to their store - or buy each other out somehow.. Advice please.

 

[quincy]

What is the name of your state (only U.S. law)? Oklahoma
My friend and I of 14 years formed a partnership in Nov 2014. The nature of business is retail clothing. There have been many issues running the business together that made me realize this is a horrible decision and I strongly don't think we can run a company together. However- I want to find a positive resolution and I don't want to lose what we've established so far- for either party. My solution is this: Can we work under the same brand name - as two separate entities. I.e. She has her own store location, her own tax id, merchandise, credit lines, bank accounts, etc. And I have mine? Would this be considered a franchise or Limited Partnership? My main concern is liability. I don't want to be held liable for anything on her end. I also want to make sure neither party is entitled to or have access to the other party's finances in any form.

Currently we have a small amount of debt and a small store worth of equipment and merchandise. I would assume we either agree on who takes what to their store - or buy each other out somehow.. Advice please.

You and your partner registered your partnership with your state and obtained all the necessary licenses or permits to operate? Did you register a name that identifies your business and its products (a trademark)? Is your current store one you purchased or leased? Do either of you intend to stay in that store? And, most importantly perhaps, do you have a partnership agreement that addresses partnership dissolution?

It is possible to dissolve your partnership. You and your partner can agree to split all assets and go your separate ways. Store equipment is considered an asset. The clothing line is an asset. The trademark is another asset. The store could be an asset or an obligation that needs to be considered in the dissolution. You are both liable for the debt incurred by your business during your partnership although this, too, can be subject to a dissolution agreement.

Once the debt is taken care of and the assets are split as you and your partner agree, you and your partner can start new businesses. It can be best to have one of the partners buy out the other (so one partner can retain the trademark and the product line). There are many reasons for this - and you will want to go over these reasons with a business law professional in your area.

What type of business entity you decide to form once your current partnership is dissolved will depend on your particular needs and wants. Sole proprietorships are easy to set up, and you can make all decisions for your business, but you will also hold all responsibility for any debts or obligations and both your business and your personal assets are at risk. In other words, there are pros and cons. In fact, all business forms come with both pros and cons.

It can be important, therefore, for you to discuss your current partnership dissolution and your future business plans with a business law professional in your area to determine what will be best for you (financially, tax-wise, liability-wise) as you move ahead.

Another reason you will want a personal review of all facts and specifics by a business law professional in your area is so that nothing is left undone with your former business and your former business partner that can cause you legal grief later.

Good luck.

 

[Mzbebe14]

No- we don't have a partnership agreement. We obtained a wholesale tax permit under 'partnership' as well as a fein# under partnership, and made a declaration of business, declaring the business name and address ownership. And both names are on the credit cards and bank accounts. But we never formed a contract or partnership agreement..

 

[quincy]

No- we don't have a partnership agreement. We obtained a wholesale tax permit under 'partnership' as well as a fein# under partnership, and made a declaration of business, declaring the business name and address ownership. And both names are on the credit cards and bank accounts. But we never formed a contract or partnership agreement..

Okay. Without a partnership agreement, the dissolution of your partnership can be handled in a way that satisfies you both.

For the dissolution, though, I recommend you have a professional assist you so that no dispute will arise in the future that only a court can resolve. Even though you started your partnership without a written agreement, ending the partnership with a written agreement can be important.

What you might want to do in advance of you and your partner meeting with the professional is to get what you can already agree on written down. Then make a list of all assets and all debts. Some of the assets may have to be sold to pay off the debts. You should both leave the partnership with no outstanding debt, if possible. Also write down those areas that will need careful discussion (for example, who will continue the clothing line and who will retain the trademark and how to handle any existing customer list and how to handle any existing lease on the store).

Here is a link to the Small Business Administration's information on "Exiting or Dissolving a Business Partnership:" https://www.sba.gov/blogs/exiting-or-dissolving-business-partnership-your-options-and-process-explained

Because all aspects of your business will need a personal review, and we cannot do personal reviews on this forum, you will need to seek help in your area. Good luck.