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Partnership Disputes

How do you dissolve or exit a business partnership?

Partnerships carry a risk that surprises people: partners are generally jointly and severally liable for partnership obligations, so an exiting partner can remain exposed for debts incurred while they were in — and sometimes afterwards, if third parties were never notified. Dissolving properly is as much about limiting future liability as dividing assets.

What to do next

  1. Read the partnership agreement, or accept the default rules

    Without an agreement, provincial partnership legislation supplies default rules on profit sharing, dissolution and notice — and they are rarely what partners assumed.

  2. Notify third parties and the registry

    This is the step that limits ongoing liability. File the required registry changes and notify banks, landlords, suppliers and clients in writing that you have left.

  3. Account for everything before dividing

    Partners owe each other fiduciary duties and a duty to account. Draw a line: assets, work in progress, receivables, liabilities, and any personal guarantees given.

  4. Deal with personal guarantees explicitly

    Leases and credit facilities frequently carry personal guarantees that do not end when you leave the partnership. Get them released in writing or you remain on the hook.

Frequently asked questions

Am I liable for debts after I leave?

Potentially, for obligations incurred while you were a partner, and for later ones if third parties were not notified. Proper notice and registry filings are what limit this.

There's no written agreement.

Provincial partnership legislation supplies default rules — equal profit sharing among them — which often differ from what partners believed. Get advice on what actually applies.

Who gets the clients?

Usually the most contested question. Fiduciary duties constrain soliciting during the partnership, and any non-solicit provision governs afterwards. Document what you do.

What about my personal guarantee on the lease?

It survives your exit unless the landlord releases you in writing. Obtaining that release should be a condition of the exit deal.

This is general information, not legal advice. Laws vary by location and every situation is different — speak with a qualified lawyer about your specific circumstances.

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By submitting, you agree to be contacted about your inquiry. This is not legal advice and does not create a lawyer–client relationship.

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