Leaving a Business
I just got a call from someone who wants to resign from his company, leaving his partner behind. He was surprised to learn there is far more to this process than simply filing the resignation paperwork with the Secretary of State.
First, is there an operating agreement (for an LLC) or a shareholder agreement (for a corporation)? If so, that document should dictate how one owner can terminate his or her interest in the business. A good owner’s agreement will also spell out a formula for calculating how much money the remaining partner must pay the leaving partner for his interest in the business.
Even if the leaving partner doesn’t want any money and just wants out, chances are he is tied to the business in more ways than he realizes. This is where things get tricky. Basically, you need to retrace every step you took to walk into the business to walk back out. As the leaving partner, you should consider whether you signed your name to obligations such as lease agreements, personal guarantees, credit cards, bank loans, vendor contracts, utilities, bank accounts, insurance policies, service agreements, licenses, etc. This is why a corporate book is very important.
If you can’t remember everything you signed, make sure you get a release of liability from the remaining partner so that if any creditors or third parties come after the business after you’ve resigned, you aren’t held responsible.
The very last step in this process should be filing the resignation paperwork with the Secretary of State. Why? Because, according to Nevada law, by filing that paperwork you are promising that you’ve already tied up all those aforementioned loose ends and are now resigning from your position with no remaining strings attached. Be careful about filing this form before those issues are handled because it could result in personal liability.