Since the state of Georgia is among the roughly one-third of all states* still governed by the Uniform Partnership Act (UPA), it recognizes the following stages of partnership dissolution referenced by that Act. These three stages are: (1) dissolution, (2) winding up, and (3) termination. Additional information about each of these stages is set forth below.
Activities Commonly Handled During the Partnership Termination Process
Dissolution. As noted above, the first stage of terminating a partnership in Georgia is referenced as the “dissolution” phase. During this phase, the partnership can still conduct business. However, it does mean that the relationships between the partners are changing. This frequently happens following the death of a partner -- or when someone either chooses to leave the partnership – or is asked to leave the group for various reasons. The remaining partners will normally try to “buy out” the departing partner’s shares in the business. (A new partnership or other business structure will need to be created following the conclusion of the third and final stage of “dissolving” the partnership -- as discussed below);
Winding up. The UPA references the second stage of closing down a partnership as, the “winding up” phase. This is the time when the partnership brings all of its work activities to a close. It's also during this stage that all debts must be paid off – or concrete plans set in motion to soon honor all of these obligations. (The state normally requires written information about any outstanding debts prior to terminating the partnership). Of course, after all debts are paid, the partners must settle up with one another in case any further profits are available and need to be split. (Note: Should any lawsuits be currently pending against the partnership, some assets may be temporarily “frozen” by a court until the litigation is concluded);
Termination. The final stage occurs when the state officially “terminates” the existence of the partnership. Of course, as noted above, any pending litigation against one or more partners may delay the end of this stage, as well as the partnership’s general failure to finish paying off all of its debts -- or at least documenting for the state that its payment arrangements have been fully accepted by all outside parties, vendors or creditors regarding such debts.
A Slightly Shorter, Simpler Summary of These Three Stages of Termination
Another useful way you can view these three stages is to consider the first stage of closing down a partnership in Georgia to be the one during which the legal status of the parties has changed (and is still changing). The second “winding up” phase is the one mainly concerned with settling the remaining economic concerns of the partnership (while concluding all work projects). The third and final phase, referred to under the UPA as the “termination” one, signals that the “winding up” has clearly come to an end.
*The other two-thirds of all states have chosen to have their partnerships governed by the Revised Uniform Partnership Act (“RUPA”).
To obtain help with handling all of your Georgia business planning needs, please contact Shane Smith Law today. You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.