Steps for Dissolving a Partnership in South Carolina

By Elizabeth Rayne

Knowing the process for ending a general partnership can help partners effectively wrap up business affairs when it comes time. In South Carolina, the filing of dissolution paperwork with the state is generally not required. However, it is a good idea for partners to execute a written agreement regarding distribution of company assets and payment of creditors in the event of dissolution. Additional steps, including cancellation of professional licenses and permits as well as satisfaction of tax liabilities, may also be involved.

State Registration and Dissolution

In South Carolina, general partnerships are not required to register with the Secretary of State's office before operating a business. Instead, a partnership is automatically formed as soon as two individuals begin doing business together. As a result, a general partnership does not have to file dissolution paperwork with the state to go out of business. Instead, a partnership ends when one or more partners decides to leave the business and the partners wind up the affairs of the business.

Written Dissolution Agreement

Partners may consider drafting a dissolution agreement to document the decision to close the business and determine how the business will wind up its affairs. The dissolution agreement may specify which partner is responsible for the winding-up duties. The responsible partner must liquidate and distribute assets to creditors and determine how any remaining assets are to be distributed to the partners. Unless otherwise specified in a partnership agreement, South Carolina law provides that creditors are paid first, then partners are paid back for their portion of capital contributions. If there are assets remaining, profits are paid to partners in proportion to their ownership interest.

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Registrations and Permits

In dissolving your partnership, you must ensure that all registrations and permits in the partnership's name are cancelled. This includes any assumed business names registered at the local level, as well as city licenses and permits. You may also cancel any professional or occupational licenses that you will no longer use. Properly canceling business registrations will ensure that you protect both your financial and professional reputation.

Final Tax Returns

You must ensure that all of your final tax obligations are taken care of. If you were responsible for either sales tax or payroll taxes, you must submit the final tax returns. The partnership must distribute final schedule K-1 forms to the partners, which will list each partner's share of the partnership income and loss. The partnership must also file its final tax return with the state. The partners will report their final share of the income on their personal income tax returns.

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How to Liquidate a General Partnership
 

References

Related articles

What Constitutes a Legally Binding Business Partnership?

A partnership is a common legal structure that two or more people can use to manage a business together. The business is formed as soon as two individuals start doing business together, but you may formalize the arrangement by registering with the state or drafting a partnership agreement. The business owners of a partnership have flexibility in how they want to run the business, while the partners remain personally liable for the debts and responsibilities of the business.

Dissolution of Sole Proprietorship

When it comes time to discontinue the operations of a business formed as a sole proprietorship, owners may find obstacles that prevent them from simply walking away from the company. This is due to the fact that, throughout the life of the organization, the assets and liabilities of the business have become intermingled with the assets and liabilities of the individual owner. The result is that complete dissolution of a sole proprietorship may be more of a challenge than with other business entities.

Canceling a Partnership Agreement

You may end a partnership agreement for any reason including disagreements among the partners, or the need for a different type of business structure, such as a limited liability company, because of growth. Once you've decided to cancel a partnership agreement, you must take steps to limit your personal liability for the partnership's debts and the actions of your former partners.

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