Financial Statement Review and Ratio Analysis(#2 in series)
Q: With respect to “partnership” or “LLC” entities, the slide indicates the entity needs to be dissolved and reformed every time new owner is added or removed. Would you please explain with a little more in detail as to how it works by dissolving or reforming it, i.e. file a copy through county for recording, use the same entity name, etc.?
A: The actual process will vary by state or by the legal entity establishing the terms and conditions for forming partnerships. But, in general, think of the process of dissolving and reforming a partnership as more in line with adjusting an existing partnership agreement that is subsequently signed by all parties. Once the new agreement is in place, all partners sign off on it, which, in effect, dissolves or over-rides the existing partnership agreement and partnership and establishes a new partnership. The new agreement needs to be refiled with the appropriate authorities. The same name can be used and usually is used.