someone shaking another's hand

What Happens When a Business Partner Decides to Leave the Partnership?

Over time, many members of business partnerships decide to move on from their collaboration, and depending on the nature of that coalition, the exodus of a business partner could lead to monumental consequences or simply mean that business continues as usual. 

In any case, the departure of a business partner is an event that leads to at least some level of readjustment and change for the remaining entities of the partnership. 

Why Business Partners Leave Partnerships

There is no shortage of reasons why a partner may decide to leave a partnership, with some common examples including the following:

  • Retirement
  • Physical or mental health concerns
  • Death
  • Bankruptcy of the partnership
  • Illegal activity on the part of the partnership
  • Internal disputes
  • Change of heart, goals, or desires
  • Incompatible work styles

Regardless of their reasons for leaving, partners who plan on exiting a partnership should prepare their fellow partners well in advance of their departure date. They should clearly communicate the reasons for their withdrawal and give a firm date for their exit. Doing so gives the other members time to adjust and make arrangements for the partner’s absence. 

What happens when a business partner decides to leave the partnership?

Generally speaking, there are two main outcomes that may be triggered when a business partner walks away from a partnership. It either comes to an end or continues on without them.

End of Partnership

Typically speaking, partnerships involving only two members are those that come to an end when one partner leaves. Still, partnerships with more than one member may also dissolve when one particular member leaves, depending on the circumstances of the partnership and the importance of the leaving associate. 

For example, a three-partner partnership may not necessarily dissolve upon the exodus of one of its partners, but if that partner was a managing associate, then the partnership may very well end up dissolving shortly after their exit unless another partner can take over that role. 

Partnership Continues

In other cases, if a partner leaves, the partnership may continue when at least two partners remain. If so, it will be up to the remaining partners to determine how to structure the new face of the partnership and whether to bring on new partners. 

For many partnerships involving more than two attorneys, the departure of partners is contemplated in detail in their partnership agreement. Contingencies and protocols are typically put into place to manage the potentially volatile circumstance of a partner’s departure. 

Protecting the Partners and the Business

In every case, partners seek to protect themselves and their businesses when their partner leaves. They understand the vulnerabilities that may arise when a partner departs, such as a lack of adequate personnel or issues relating to company secrets and finances. 

A departing partner can potentially cause the others to lose money or face civil liability if their exodus o is not handled correctly, as various loose ends and the like can fall at the feet of the remaining partners to solve. 

However, these and other negative consequences can be easily avoided with ample notice of departure from the partner and guidance and representation by an experienced business law attorney, who can help protect the other partners by ensuring that the partnership’s obligations and liabilities related to the departing partner have been fulfilled and are now considered discharged. 

Meet With a Business Lawyer for Help

Attorney William M. Kolb is ready to meet and help you comb through your business law issues in Rhode Island until an acceptable resolution is found. Call for a consultation relating to departing partners of a partnership or any other business law matter, and let’s delve into your case together.