As recently as April of this year, Steve Davis, former chief of the now defunct legal giant Dewey & LeBoeuf LLP, accepted a half-a-million dollar settlement over mismanagement claims. The former global law firm headquartered in New York City employed over a thousand attorneys in 26 offices around the world at the time of filing for bankruptcy in May 2012.
By using a Limited Liability Partnership structure, the partners of Dewey & LeBoeuf LLP benefitted from certain legal protections which partners in a general business partnership do not automatically have. When dissolving a general partnership, bitter disputes can ensue where proper arrangements have not been put in place for resolving key issues such as partner liability. These battles should also be avoided as they further damage brand names associated with the partnership. If you are preparing to dissolve a partnership, pay attention to the following issues:
It is crucial for partners to formally agree on arrangements to pay off debts. Without resolving this, as a partner, you may find yourself in the wholly undesirable situation of having paid your share of the debts, while still being chased by creditors because your other partners have failed to do so.
Brand Names and Control
Where one partner buys another partner out, future brand names and control is a straightforward step. In other situations, you will need to consider who will keep the brand name and who will retain control of the business and draft legal documents to that effect.
Complete the necessary formalities to ensure the formal dissolution of the partnership. Dissolution requires filing relevant paperwork with state authorities as well as publishing required public notices about the partnership dissolution. This is particularly important in a partnership structure, since any partner has the right to transact in the name of the partnership without informing the other as long as the partnership is still intact.
Consider hiring an experienced corporate attorney to help ensure that the dissolution process runs as quickly and smoothly as possible. Your attorney will be well-placed to mediate any issues in an amicable dissolution, or handle the dispute where the split is acrimonious.