What are the Steps for Dissolving a Partnership?

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  • Written By: Osmand Vitez
  • Edited By: Kristen Osborne
  • Last Modified Date: 20 October 2019
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Partnerships allow two or more individuals the advantage of running a business under a specific set of rules and procedures. Dissolving a partnership generally requires a few steps to legally end the company. Events that can trigger the dissolution of a partnership include the death of a partner, one or more partners file for bankruptcy or the company engages in illegal activity. Dissolution steps include notifying government agencies for tax purposes, filing a liquidation notice, contacting creditors to end business relationships and informing vendors, suppliers and customers about ending the business.

When operating a partnership, specific agreements should be in place to cover issues like dissolving a partnership. Written agreements provide specific instructions for the dissolution steps. In the absence of an agreement, each partner must dissolve the partnership, as it cannot continue its operations. Filing a notice with the federal or state agencies responsible for monitoring the company’s tax and other legal operations is necessary to end the company’s burden of responsibility for filing payroll or sales tax information. One partner may need to keep tabs on the partnership’s information after dissolution in order to provide information for government agencies.


A liquidation notice is typically necessary to alert the state about dissolving a partnership. While not always required, most states issue operating licenses and require partnerships to collect taxes for specific business activities. Filing a liquidation notice ends the relationship between the state and the partnership. In some cases, partners may not receive a refund on any paid licenses pertaining to the partnership. Partners in professional organizations, such as law firms, public accounting offices or medical practices, may need to ensure they keep their personal licenses after dissolving the partnership.

Creditors represent any stakeholder that is owed money by the partnership. This step is extremely important, as any partner in the company can make legally binding agreements that involve all partners. Failing to send written notices can result in partners being held accountable for actions of other individuals after the process for dissolving the partnership begins. General partnerships will typically need this step taken care of sooner than later, as all partners in a general partnership have unlimited liability in the company.

Notifying vendors, suppliers and customers is the final step when dissolving a partnership. Vendors and suppliers will typically request that any open balances be paid off prior to the partnership closing. Dissolving a partnership with vendors and suppliers may also involve putting a hold on trade accounts to ensure no one makes unauthorized orders for the company. Customer notification can be difficult, depending on the number of customers involved with the partnership. A basic form letter or signage in the stores location may be the best way to inform customers about the dissolution.


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