Last Updated March 28, 2024
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What is a Notice of Withdrawal from Partnership?
A Notice of Withdrawal From Partnership is a formal notice that one of the partners in a partnership is leaving. The notice lets all the partners know which partner is exiting the partnership and the date it takes effect.
There are two types of partnership withdrawals:
A voluntary withdrawal is when a partner decides to leave a partnership of their own free will. Retirement or career change are the usual reasons for this type of withdrawal.
Involuntary withdrawal occurs when the partners remove a member of the partnership. 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 called a:
- Partnership Withdrawal
- Partnership Withdrawal Letter
- Partnership Withdrawal Agreement
- Partnership Dissolution Agreement
What happens when a partner exits a partnership?
In most cases, the details in the Partnership Agreement will determine what happens when a partner exits a partnership. The agreement will likely specify how much notice the partnership needs to receive and whether the partnership will dissolve. If there is only one partner remaining, the partnership must dissolve.
The Partnership Agreement will also note the partner’s capital contributions, which will indicate their financial stake in the partnership and how much they are entitled to when they leave.
If the Partnership Agreement doesn’t specify what happens when a partner leaves, the remaining partners are bound by the Partnership Act, 1890 to dissolve the partnership. When a partnership dissolves, its affairs must be wound up, assets liquidated, debts paid, and the partners equally divide the surplus.
The Partnership Act, 1890 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 suit your partnership. This is why it’s very important for any partnership to draw up a Partnership Agreement at the outset.
How do I create a Notice of Withdrawal From Partnership?
LawDepot's Notice of Withdrawal from Partnership template allows you to easily create a document that’s customised for your needs.
1. Specify who is leaving the partnership
Begin your Notice of Withdrawal From Partnership by stating if the withdrawing partner or the remaining partners are drafting the document.
If it is an involuntary withdrawal, the notice needs to state the reason for removing the partner. Note that to remove a partner, the Partnership Agreement must include the power to do so. You can choose from the following reasons:
- The partner has died
- Incapacity of the partner
- Disability of a partner
- Incompetence
- Breach of fiduciary duty
- Criminal conviction
- Operation of law
- Legal judgment
2. Provide the partnership’s and the withdrawing partner’s details
Provide basic partnership details in your withdrawal notice. This includes the partnership’s name and purpose, and the date it was established.
You’ll also need to state the withdrawing partner’s details. Be sure to specify their name, address, and whether they're an individual or a business entity.
3. Include details about the withdrawal
Indicate when the partner is withdrawing from the partnership in your notice. You can do this by providing an exact date or the amount of notice the partnership is receiving (e.g., two weeks, 90 days, six months, etc.).
Also, mention whether the partnership has received a third party offer to purchase the withdrawing partner's interest in the partnership. Name the third party and state the offer amount if an offer has been made.
If the Partnership Agreement requires the partners to buy out the withdrawing partner’s interest, specify when they will make the buyout offer.
4. Include any additional clauses
Include any additional clauses in your notice that are relevant to the partner's withdrawal. Review your Partnership Agreement if you're unsure whether any clauses need addressing.
5. Specify the signing details
Once your Notice of Withdrawal From Partnership is ready, you can sign and date the document.
Withdrawal notices don't usually need witnesses to become official documents. However, if you do include a witness, they should be an adult capable of understanding the witnessing process and who has no conflicts of interest.
