A partner leaves either by retiring under the partnership agreement, with the firm carrying on, or by ending the partnership altogether, which is what the Partnership Act 1890 does by default. Either way the outgoing partner stays liable for debts incurred while they were a partner, and can be caught by later debts if customers are not told. The protection comes from a written exit agreement with an indemnity, proper notice to everyone who dealt with the firm, removing your name from the business and a clear route to being paid out.

Can I retire and leave the firm running?

Only if the partners have agreed that you can. The 1890 Act has no default right simply to retire while the others carry on. Where no fixed term has been agreed, section 26 lets any partner end the partnership by giving notice to all the others, and section 32(c) says that notice dissolves the partnership from the date in the notice or, if none, from when it is communicated. If the partnership was made by deed, a signed written notice is enough.

That is why most partnership agreements contain a retirement clause: a notice period, a retirement date, what the continuing partners pay and any restrictions on competing afterwards. If the agreement has one, follow it exactly, because a notice that does not comply may not take effect when you expect. Where there is no agreement, a negotiated retirement deed signed by everyone achieves the same result. The background rules are in the Partnership Act 1890 default rules, and the clauses to look for are covered in partnership agreements.

Members of an LLP are in a different position: section 4(3) of the Limited Liability Partnerships Act 2000 lets a member leave in accordance with the agreement or, if there is none on the point, by giving reasonable notice to the other members, without dissolving anything. See LLPs explained.

When does the whole partnership end instead?

Subject to the agreement, section 32 dissolves a partnership at the end of a fixed term, at the end of the single venture it was formed for, or on notice if it was for an undefined time. Section 33 dissolves it on the death or bankruptcy of any partner, and lets the others choose to dissolve if a partner allows their share to be charged for a separate debt.

If none of those applies and the others will not agree, a partner can ask the court under section 35. The grounds include a partner becoming permanently incapable of performing their part of the contract, conduct calculated to prejudice the business, wilful or persistent breach of the agreement, the business only being able to run at a loss, and any case where the court thinks it just and equitable. Removing a partner against their will without dissolution needs an express power, as explained in expelling a partner.

What liability follows me after I leave?

Three rules decide this.

  • Past debts stay with you. Section 17(2) says a retiring partner does not cease to be liable for partnership debts or obligations incurred before retirement. Section 17(3) allows a release only by agreement between you, the partners in the new firm and the creditor, which can be express or inferred from a course of dealing.
  • Future debts can reach you without notice. Section 36(1) lets a person dealing with the firm after a change treat all apparent members of the old firm as still being members until they have notice of the change. For people who had not dealt with the firm before, an advertisement in the London Gazette (for a firm whose principal place of business is in England or Wales), the Edinburgh Gazette (Scotland) or the Belfast Gazette counts as notice under section 36(2). Existing customers and suppliers need actual notice.
  • Holding out. Under section 14, anyone who represents themselves, or knowingly allows themselves to be represented, as a partner is liable as a partner to anyone who gives credit to the firm on the faith of that representation. Leaving your name on the letterhead or website is the classic trap.

There is one narrow exception. Section 36(3) says a retiring partner who was not known to the person dealing with the firm to be a partner is not liable for debts contracted after retirement. The wider liability picture is in partners’ joint and several liability.

What steps protect an outgoing partner?

  1. Put the exit in writing. A retirement or dissolution deed should fix the leaving date, the amount and timing of the payout and who takes on which liabilities.
  2. Get an indemnity. The continuing partners should indemnify you against the firm’s debts, including those incurred before you left. It does not stop creditors suing you, and it is only as good as the continuing partners’ means, so ask for security where the sums are large.
  3. Seek releases for big obligations. Leases, bank facilities, hire purchase and personal guarantees will not release you without the other party’s agreement under section 17(3). Ask landlords and lenders to novate or release in writing.
  4. Give notice. Write to every client, supplier, lender and landlord the firm deals with, and consider a Gazette notice for everyone else. Section 37 lets any partner publicly notify a dissolution or retirement and require the others to join in any acts needed to do so.
  5. Remove your name. Update letterheads, websites, signage, email signatures, directories and professional body records so nobody can say they relied on you still being a partner.
  6. Check insurance for past work. Claims about work done before you left can still be brought against you, so confirm in the exit agreement that the firm’s cover for that work will continue.

How is the outgoing partner paid out?

Subject to the agreement, section 43 makes the amount due to an outgoing partner for their share a debt accruing at the date of dissolution or death. Most agreements replace this with a timetable, often instalments, and a valuation method. Your capital and current account balances are usually the starting point; see capital and current accounts.

If the continuing partners carry on the business using the firm’s capital or assets without settling accounts with you, section 42(1) gives you, unless otherwise agreed, the choice between the share of profits since dissolution that the court finds attributable to the use of your share of the assets, or interest at 5% a year on the amount of your share. This does not apply where the agreement gives the continuing partners an option to buy your share and they exercise it properly (section 42(2)).

Where the whole firm is wound up, section 38 keeps each partner’s authority alive only so far as needed to wind up the affairs and complete unfinished transactions. Section 39 entitles every partner to have firm property applied first in paying the firm’s debts, and lets any partner apply to the court to wind up the business. Section 44 then sets the order for final accounts: debts to outsiders first, then partners’ advances, then capital, with any surplus shared in profit sharing ratios. If the firm cannot pay its debts, the rules in partnership insolvency apply instead.

What do I need to tell HMRC?

GOV.UK says you must tell HMRC if you are leaving or ending a business partnership, using the online service to stop self employment, and send a Self Assessment return for the final period before the deadline. If the partnership itself is ending, the nominated partner should also send a final partnership return. For VAT, form VAT2 is used to add and remove partners from a registered partnership. How your final profits, any capital gain and retirement payments are taxed is covered in partners joining and leaving: the tax consequences.

How does this work in practice?

Illustration only. Dan is one of four partners in a building firm. The agreement allows retirement on six months’ notice, with capital repaid in four quarterly instalments. Dan gives notice to retire on 30 June. Before that date he signs a retirement deed with an indemnity, the bank releases his guarantee in exchange for a new one from the continuing partners, and the firm writes to all its customers and suppliers. His name comes off the vans and the website, and a notice appears in the London Gazette.

In September a timber merchant that had never dealt with the firm supplies materials and is not paid. Because of the Gazette notice, Dan is not liable. A customer who sues in October over a roof built in March can still pursue Dan, because the work was done while he was a partner, but he can call on the indemnity from the continuing partners.

What mistakes do outgoing partners make?

  • Giving notice without reading the agreement. A notice that does not follow the clause, or that accidentally dissolves the whole firm, can cost more than it saves.
  • Relying on an indemnity alone. Creditors can still sue you; the indemnity only gives you a claim against your former partners.
  • Not telling existing customers. A Gazette notice does not protect you against people who already dealt with the firm.
  • Leaving your name in use. Holding out can make you liable for debts incurred long after you left.
  • Agreeing a payout with no timetable. Without one, arguments about valuation and interest can run for years.
  • Forgetting HMRC and VAT. Unfiled final returns lead to penalties, and without a VAT2 removing you, HMRC’s VAT record still lists you as a partner.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.