How would I dissolve a partnership that's not "legally" a partnership?
I am 22 years old. When I was 19 I started a successful business and filed it as a sole proprietorship. Last year, I allowed an employee/friend to invest a certain dollar amount into the company. We found a basic partnership agreement online and changed it according to our needs. We both signed this, saying that I control 80 percent of the business, and he controls 20 percent. We never changed the legal form of the company out of a sole proprietorship, so I think legally I have 100 percent ownership still. My name is on every document we have; his is on none except for the partnership agreement we signed. Since then, I have learned that his poor management skills, poor communication skills and overall poor business skills are starting to pile up and hurt the business. So my question is: Can I dissolve this?
Although you didn't file a partnership certificate, your partner did contribute money and you did sign a partnership agreement. So technically, you do have a partnership on your hands. What you're looking to do is to regain sole control of the partnership.
Go back to your partnership agreement to follow the procedures for buying out an owner. If your agreement is silent on that point (documents downloaded from the internet often carry the risk of omitting significant provisions), you'll have to work out your own arrangement with your partner. Maybe he'll be willing to walk away from the business for a sum equal to the return of his investment. Maybe you'll have to pony up a little more in order to get yourself free and clear.
In any event, you will need to have the difficult conversation of "this isnt working and I no longer want to do this with you." Whatever you agree to, put it in writing . . . and involve an attorney in the process to make sure it's done properly.
Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.