How is a Civil partnership dissolved?

The dissolution of a civil partnership is a simple procedure when all the partners are in agreement and there are no debts

A professional partnership is an agreement whereby two or more people undertake to put forth common money, goods or industry, with the intention of distributing profits among the members.

There are two types:

  • Public Professional Partnership. Established through a public document issued in the presence of a notary; necessary when members contribute properties or royalties.
  • Private Professional Partnership. Established through a private document signed by the parties. Has no legal personality.
Top banner Negocios Account Top banner Negocios Account
Negocios account
The account for your business without a maintenance fee.

Grounds for dissolution of a Civil Partnership

The dissolution of a professional partnership (as well as its formation) follows a simple agreement among the parties; specifically, in the case of the 2016 financial year, the legal change in the Law on Personal Income Tax (Law 35/2006 LIRPF item 8.3) as well as the Law on Corporation Tax (Law 27/2014 LIS item compelled professional partnerships with legal personality and commercial activity to pay taxes beginning January 1, 2016. As a result of the Corporation tax, many of these companies have been motivated to dissolve and liquidate.

A Professional Partnership can dissolve for reasons including:

1. The term for which it was created expires.

2. The basis for its activity is no longer in effect.

3. The death or insolvency of any one of the members.

4. When so wished by any of the members, (so long as, e.g. it is not for specific period of time and it fulfills certain conditions).

5. When agreed upon by the members.

6. When any one of the members doesn't fulfill his/her social obligations.

7. At the request of one of the members, and for no particular reason, after " X " years of the partnerships' existence.

8. As a consequence of the legal change compelling members to pay taxes under the 2016 Law on Corporation Tax, which they do not wish to do, in accordance with the 19th transitory provision of the LIRPF.

The procedure for dissolving a professional partnership is simpler than that dissolving for commercial entities. As with the formation of the partnership, a private arrangement among the parties, the dissolution is also simpler when all members consent and there are no debts to take care of. Firstly, members must take care of any debts with third parties and with the public administration . If the partnership dissolves without addressing the outstanding payments, the members' personal wealth will serve as payment for any claims or will be seized, to a degree correspodning to each member's percentage of ownership.

Once the Professional Partnership is dissolved, the liquidation process will begin.

Once all debts are cleared, any remaining assets must be distributed. The allocation of the assets will be laid out in the dissolution agreement. The dissolution of a professional partnership is governed by the rules of the distribution of estate assets (article 1707 c.c). An expert appraisal of the value of the assets and rights will only be necessary if the partners cannot come to an agreement. When determining the amount to be distributed among the partners, the most logical approach is to adhere to the partnership's net worth (assets and credits less company debts). The reasons that led the partners to dissolve the partnership should also be outlined in the dissolution agreement.

Center Banner Negocios Account Center Banner Negocios Account
BBVA for Self-employed workers and SMEs
An account aimed at self-employed workers and SMEs that need an account for their professional activity.

The dissolution of the partnership does not alter the contractual commitments with third parties. Instead, any commitments or debts are assumed by the members.

Any partner can take legal action in the event of disagreement. During the same process, he/she can demand the liquidation of the partnership's assets and the restitution of his/her contributions.

Once the dissolution agreement has been formalized, the Professional Partnership must deregister with the Tax Agency, submitting a sealed copy of the agreement and the corresponding census model. Once the entity has been completely terminated, each partner must deregister individually with the Census of Business Persons, Professionals and Employers as a co-proprietor of the partnership; this process also uses the model 036.

When deregistering from the Census, in both the partnership and the individual partners processes, it is necessary to bring along the documentation requested by the Tax Agency at all times as well as the dissolution agreement regarding liquidation of the partnership.

If the professional partnership had a contribution account code assigned by the General Social Security Treasury (TGSS), having once had contracted workers, partners will also request deregistration of the assigned Contribution Account Code in order to dissolve the partnership.

The deregistration application uses the Model TA.7 request form for registration, deregistration and change of contribution account information.

For the purpose of fulfilling their contribution requirements under the Special Scheme for Self-employed Workers, the partners/co-proprietors registered in the TGSS for their activity in the professional partnership must formalize their deregistration if they do not wish to continue with another activity in this special scheme.

CTA Negocios Account CTA Negocios Account
Companies - You might also be interested in Companies - You might also be interested in

You might also be interested in

  • We'll tell you the different criteria for classifying a company based on its size.
  • We explain how they help to establish how much tax each worker has to pay depending on their income
  • We'll tell you everything you need to know about this temporary strategic partnership.