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How To Dissolve A Partnership With Financial Problems

If the business is a solvent partnership then it will be dissolved by agreement between the relevant parties in accordance with a partnership agreement. If the business partnership is insolvent and cannot pay its debt then it will go into Liquidation, Administration or a Partnership Voluntary Arrangement (“PVA”).


There are two types of partnership. The first is a partnership where all the partners are jointly and severally liable for the debts. The other is an LLP where there is limited liability.

In the case of an insolvent partnership needing dissolution, the usual route is Liquidation. In more urgent situations Partnership Administration can be used as it is a faster option. It is also very useful where a business can be rescued or alternatively stopping legal action, such as a bank, appointing a receiver.

For a normal (non LLP) partnership, the partners are all jointly liable for the debts not paid for by the partnership assets. This can mean serious implications for the individual partners which might mean a PVA is a better route and even possibly Individual Voluntary Arrangements for the partners.


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