How to Dissolve a Partnership in Arizona

To dissolve a partnership in Arizona, numerous tasks must be completed, Dissolutions frequently involve conflicts between co-owners.  Some disputes might be resolved by the terms of the partnership agreement itself, while others may require assistance from the court.

Review and Comply with the Partnership Agreement

To dissolve a partnership, you must first review your agreement. While a written contract is not required in Arizona, most partnerships create a formally written contract at some point.

Unfortunately, if you do not have a written partnership agreement, then you must use the default provisions dictated by the Uniform Partnership Act.

A well-written partnership agreement should dictate how to resolve disputes, and also how to proceed with a dissolution. The agreement may require written permission from all members, an official vote, or impose other requirements for dissolving the partnership. To terminate a partnership properly and reduce disputes between owners, it is essential to carry out the provisions of the partnership agreement.

Debts and Asset Distribution

You and your partner(s) must decide how to pay outstanding debts. If the partnership does not have adequate cash resources, then you may need to sell company assets to satisfy its obligations. You cannot legally dissolve a business without paying creditors in Arizona.

After debts are paid, remaining partnership assets are distributed. Your agreement should dictate how these assets are distributed, particularly since some partnerships are not based on equal ownership shares.

File the Necessary Paperwork with the State

Legally, a partnership is not required to file any forms with the state upon dissolution. However, it is in your best interest to do so. Filing a Statement of Dissolution with the Arizona Secretary of State is relatively inexpensive, and it will cancel any existing Statement of Partnership Authority that might be on file with the Secretary of State.

Tax Issues and Managing Final Tax Returns

You do not need a tax clearance before dissolution, but if you were using the transaction privilege tax from the state, such as sales tax, you must cancel the TPT with the Arizona Department of Revenue. Also, if you had employees or withheld any employer taxes, check the “Final Return” box on the withholding tax return.

When you file the partnership income tax return, check the box to indicate to the Department of Revenue that the partnership is filing its final return.  Make the same “final return” indication on the IRS Form 1065.

Dissolving a partnership can be complicated and burdensome. With a dispute pausing the process, you and other partners may not know where to turn next. Its best that you consult a business attorney for any disputes or dissolutions to ensure the process is done properly, and that your personal interests are protected. Speak with a business litigation attorney at Udall Shumway, PLC about your partnership dissolution.

This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Dissolve a Partnership in Arizona, or any other commercial litigation matters, please feel free to contact Joel E. Sannes at 480.461.5307, or log on to,  or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.