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What happens when one partner wants to leave or retire?

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Can I sell my business if a partner leaves or retires?

When a partner wants to leave or retire from a business, what happens next? Whether this means closing a business, selling a business, or dissolving a partnership, the operating structure and the number of partners that operate the business will determine whether a viable future lies ahead for the business in the aftermath of the partners’ exit.

When a partner leaves a partnership or a director leaves a limited company

The steps that unfold after a partner exits a business will vary according to the structure of the business – whether it’s a business partnership or a limited company.

If it’s a business partnership with two partners, the exit of one partner will result in the collapse of the partnership. The exit terms will be detailed in the partnership agreement which is a legally binding document signed by all participating partners when entering a partnership. If there are more than two partners, and one partner decides to exit, the partnership will remain intact.

If it’s a limited company, remember that there are no legal restrictions on the number of directors a limited company can have, so if the number of directors drops to one, the limited company will be able to continue operations as usual.

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Director wants to leave a limited company

Business-minded individuals that support each other’s commercial ambitions may partner to generate a shared profit through a popular operating method, such as a limited company or a business partnership.

As career ambitions shift, business owners approach retirement or enter a disagreement, it is likely that a partner may decide to leave the business. If you find yourself in this position, what are your options?

Partnership dispute resolution – Partnership dispute resolution helps to resolve a disagreement between partners. Arbitration and mediation are common routes used to resolve a conflict between partners and this is often cheaper than taking the legal route.

If an agreement cannot be reached, business partners may choose to dissolve the partnership.

If it’s a limited company, options include closing the business, selling the business or the exiting director can be removed as a director.

Remove director – If a director wishes to leave a company, they should submit a formal resignation letter, followed by a discussion to address the terms of exit. A TM01 form (termination of a director appointment) must be submitted to Companies House form to remove a company director.

Close a business – The company closure route will be determined by the financial health of the business and liabilities, i.e., whether to pursue solvent liquidation, insolvent liquidation, or dissolution. A licensed insolvency practitioner can ascertain the most cost-efficient route to close a business.

Sell a business – If your business is a strong income generator and an aspirational business with a strong client base, selling it can provide a route through which to cash out on your investment. A business valuation will calculate the market value of the business which will help determine the price tag.

For more information on how to sell a business when a partner retires or leaves, get in touch with a member of the Selling My Business team. Our team of registered business valuers are highly experienced in valuing businesses across all sectors, including hospitality, retail and professional services, to automotive, construction and transport.

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