Dissolving a Joint Venture

There are many reasons why parties may end up dissolving a joint venture. Their efforts may have been unsuccessful, their project may me complete, there could be clashing management styles, or there could simply be a need for a new characterization of the businesses.

If the parties to the joint venture have a written agreement governing the relationship, that agreement will likely contain the provisions that will determine the process for dissolution. In the absence of an agreement, California law will dictate how the relationship will be terminated.

If the joint venture was characterized as a limited liability company or corporation, the parties will need to follow the formal procedures to dissolve and cancel the existence of the applicable entity. In the absence of this separate legal entity characterization, the parties to the joint venture will need to proceed as if they were dissolving a general partnership. One of the most important steps will be to notify third parties, as well as relevant licensing and taxing authorities. If third parties such as vendors are not notified of the dissolution, the parties to the joint venture could be responsible for any debts that are accrued by the third party under the principles of agency.

Upon dissolving a joint venture, the parties will split the assets and debts in accordance to their agreement. In the absence of an agreement, the parties will get back what assets they contributed.  If, however, the parties do not retake possession of certain assets, such assets should be sold.

If you have questions about dissolving a joint venture, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.

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