A Notice of Retirement from Partnership document can be used by a partner who wishes to leave a partnership.
By creating a written notice of retirement, retiring partners can protect themselves from future liability related to the partnership and the partnership can protect itself from future liabilities created by retiring partners.
If a retiring partner tries to leave a partnership but does not follow the appropriate procedures, as set out in the Partnership Act of the relevant state or territory, or in the partnership's Partnership Agreement (if applicable), then the retiring partner may still be considered a partner, and may remain responsible for future liabilities of the partnership.
Furthermore, the Partnership Act in most states and territories provides that a third party which has had prior dealings with the partnership, and which has not been informed of the retiring partner's retirement, may be entitled to still treat that retiring partner as a partner of the firm. This means that the retiring partner may still be able to do things which create liabilities for the partnership - such as borrowing money in the name of the partnership. In addition, that third party may still hold the retiring partner responsible for liabilities of the partnership. Therefore, regardless of whether the legislation specifically requires third parties to be notified, it is good practice to notify them anyway, to prevent them from continuing to treat that retiring partner as a partner of the partnership.
This document can be used for several purposes:
1. It can be provided directly to the other partners in the partnership, to notify them of the retiring partner's retirement.
2. It can be provided directly to third parties to notify those third parties of the retiring partner's retirement, so that the third party will no longer be entitled to treat the retiring partner as a partner of the partnership.
3. It can be published publicly, such as in a newspaper and/or government gazette, in order to notify other third parties of the retiring partner's retirement.
If the partnership has a Partnership Agreement, then this is likely to set out certain procedures that a retiring partner must follow in order to retire from the partnership. For example, it may require the retiring partner to provide a minimum amount of notice (for example, 14 days), before the retirement becomes effective. In addition, it might state whether or not the partnership can continue after a partner retires. In some cases, the partnership may need to be dissolved.
This document can be used both if the partnership is going to continue, and if the partnership is going to be dissolved.
How to use this document
If there is a written Partnership Agreement, this should be reviewed, to ensure that the partner's retirement conforms to the pre-established guidelines.
The following information may be included in this document:
Once the document has been prepared, a copy should be provided to each partner. The Partnership Agreement may specify how these notices are to be provided to the other partners (by hand delivery, by mail, by registered mail, or whether email or other electronic methods are acceptable).
Copies may also be provided to any relevant third parties (if applicable).
The Partnership Act in some states and territories requires a Notice of Resignation from Partnership to be published in a newspaper and/or government gazette, so that third parties who may deal with the partnership in future are aware that the retiring partner is no longer involved with the partnership. Further information can be obtained by referring to the Partnership Act in the relevant state or territory, or by contacting the relevant business authority in each state or territory. Links to each of these are provided under "Applicable Law", below.
If the notice is being published in a newspaper or government gazette, then this will need to be arranged. There is usually a particular procedure to follow, and a small cost to pay - but this can be determined by contacting the publication directly.
The following legislation governs partnerships in each respective state and territory:
Generally, when a partner retires from a partnership, or the partnership is dissolved, any partner can notify the public of that retirement. However, in some states and/or territories, (including Victoria and the Northern Territory), at least one of the partners must notify the public of the retirement or dissolution.
In addition, individual states and/or territories may have additional legal requirements when dissolving a partnership in that state or territory. Further information can be obtained from the relevant business authority in that state or territory:
If the partnership has a Partnership Agreement, then this may also set out some procedures which must be followed in relation to the retirement of a partner. General principles of contract law, as provided by the common law, may govern the interpretation and application of the Partnership Agreement.
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