Last Updated December 27, 2023
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What is a Notice of Withdrawal from Partnership?
Partnerships use a Notice of Withdrawal to formally notify their partners that one of the partners is departing. The notice lets all the partners know which partner is exiting the partnership and the date it takes effect.
There are two types of withdrawals:
Voluntary withdrawal takes place when a partner chooses to leave a partnership. Retirement is a common reason for this type of withdrawal.
Involuntary withdrawal occurs when the partners vote to expel one of the partners. This can only be done where the Partnership Agreement expressly provides that a partner may be expelled. In this case, the remaining partners jointly service notice. Some common reasons for this type of withdrawal can include death, incapacity, incompetence, or a partner’s criminal conviction.
A Notice of Withdrawal from Partnership is also known as a:
- Partnership Withdrawal
- Partnership Withdrawal Letter
- Partnership Withdrawal Agreement
- Partnership Dissolution Agreement
What happens when a partner withdraws from a partnership?
In most cases where a partner leaves a partnership, the Partnership Agreement will guide what happens next. It will likely outline how much notice is required and whether the partnership dissolves as a result. If there is only one partner remaining, the partnership automatically dissolves.
The Partnership Agreement also notes the partner’s capital contributions, which will indicate their financial stake in the partnership and how much they’re entitled to when they leave.
If the Partnership Agreement doesn't specify what happens when a partner leaves, the remaining partners will be bound by the Partnership Act 1890 to dissolve the partnership whether they want to or not. The Partnership Act contains clauses which provide a default framework which applies to any partnership in the absence of a partnership agreement. Some of these provisions will likely not be suitable for your partnership. This is why it is very important for any partnership to draw up a partnership agreement at the outset.
When a partnership dissolves, its affairs must be wound up, assets liquidated, debts paid, and the surplus divided in accordance with the provisions of the partnership agreement. Ideally, if a partner retires and the remaining partners wish to continue the business, the Partnership Agreement should set out how the interest of the exiting partner will be purchased by the partnership, allowing it to continue in business.
How do I create a Notice of Withdrawal From Partnership?
LawDepot's Notice of Withdrawal from Partnership template allows you to customise a document specifically for your needs and guides you through the process.
1. State who is leaving the partnership
Begin your Notice of Withdrawal from Partnership by stating who is giving notice to the partnership.
Select “partner leaving” in the questionnaire if you’re the withdrawing partner.
If the partnership is seeking to remove one of the partners, select "remaining partners."
A voluntary exit will usually be for retirement or a career change. However, if the exit is involuntary, you will need to select the reason why the partnership is removing the partner from the following list:
- The partner has died
- Incapacity of the partner
- Disability of a partner
- Incompetence
- Breach of fiduciary duty
- Criminal conviction
- Operation of law
- Legal judgment
Note that in the case of death or incapacity, the remaining partners serve the notice on the representatives of the deceased or incapacitated partner.
2. Provide your location
Partnerships in the United Kingdom are governed by the Partnership Act 1890. However, the countries within the United Kingdom, particularly Scotland, have differing business laws that can affect partnerships.
Select the country where your partnership is located, and LawDepot will customise it to meet its rules and regulations. In doing this, you should check the governing law clause in your partnership agreement and make sure your choice reflects what is written there.
We have Notice of Withdrawal from Partnership templates for:
- England
- Northern Ireland
- Scotland
- Wales
3. Include the partnership’s and the withdrawing partner’s details
Provide basic details about the partnership in your withdrawal notice. The details should include the partnership's name, purpose, and date it was established.
Then you’ll need to indicate which partner is withdrawing from the partnership. Be sure to specify the partner's name, address, and whether the partner is an individual or a business entity.
4. Provide details about the withdrawal
You’ll then need to indicate when the partner is withdrawing from the partnership. You can do this by proving an exact date or the amount of notice the partnership is receiving (e.g., two weeks, 90 days, six months, etc.).
Also, state in your withdrawal notice whether a third party has offered to purchase a partner's interest in the partnership.
If the Partnership Agreement requires the partners to buy out the withdrawing partner’s interest, specify when they will make the buyout offer.
5. Describe any additional clauses
Be sure to include any additional clauses that are relevant to the partner's withdrawal in your notice. Review your Partnership Agreement if you're unsure whether any clauses need to be addressed.
6. Specify the signing details
Review your Notice of Withdrawal from Partnership. Once it’s ready, you can sign and date the document.
Withdrawal notices don't typically require witnesses. However, a witness should be an adult capable of understanding the witnessing process and who has no conflicts of interest.
