Ending a partnership
Any partner can, subject to any agreement that's in place, end the partnership and effectively bring the business to a close.
Partnerships may be dissolved when:
- the term of the partnership has expired
- one partner has given notice to the other partner(s)
- the partnership is now illegal e.g. one partner can no longer legally own a business
- there is a court order
- there is a death of a partner or the business has gone bankrupt.
When a partnership is dissolved or a partner retires, according to the Partnership Act 1958 (s41), a notice must be placed in a Government Gazette and in at least one newspaper circulating in each district in which the business operates.
Watch out! If all the partner(s) are not in agreement about the dissolution the retiring partner may continue to be liable for debts and defaults if the business continues to be run by the remaining partner(s).
If the notice is not signed by the remaining partner(s), the retiring partner will continue to be at risk of being sued for debts and defaults of the remaining partner(s) after the dissolution.
In the absence of a written agreement, S48 of the Partnership Act 1958 (available on the Victorian Legislation website) sets out the rules how the assets of the business are to be disposed of.
Ending a Limited Partnership
There is a different process for ending a limited partnership. To end a limited partnership you need to notify Consumer Affairs Victoria (CAV) and fill out the End a Limited Partnership form within seven days of ending a limited partnership.
There are three ways a limited partnership can end:
- changing from being a Limited Partnership: a limited partnership can be ended only when it has no more limited partners. This means all limited partners take on unlimited liability or leave the partnership. It also requires all the partners to agree to change the business from being a limited partnership to a partnership in which all partners equally share in the management and liabilities of the business.
dissolving a Limited Partnership: subject to the terms of the partnership agreement, there are certain restrictions when dissolving a limited partnership. A limited partner cannot dissolve a limited partnership by issuing a notice on their own. The general partner(s) or the other limited partner(s) cannot dissolve a limited partnership on the basis that the limited partner:
- has allowed their share of the partnership property to be used as collateral (charged for) debts outside of the partnership
- has died
- has become bankrupt
- has retired
- is a body corporate and has become dissolved.
- winding up a Limited Partnership: When the partners agree to wind up a limited partnership, it must be carried out by the general partners, unless a Court or Tribunal orders differently.
For more information on dissolution of a Limited Partnership, go to the Consumer Affairs Victoria website or call 1300 55 81 81.