Two Roads When Partners Diverge

Partnership breakdowns rarely arrive with a clean exit clause. Most disputes start informally — a disagreement over capital calls, a strategic divergence, a partner pursuing personal opportunities. Eventually they become legal questions. Under Nevada's Uniform Partnership Act (NRS Chapter 87), there are two structurally different remedies: buyout and wind-up.

When a Buyout Is the Right Path

A buyout preserves the operating business. One or more partners continue, the departing partner is paid out at fair value, and the entity continues. Nevada law provides for buyouts under several scenarios — voluntary withdrawal, dissociation for cause, and judicial expulsion under NRS 87.4337.

The buyout valuation is typically the higher of the partner's liquidation value (what they'd get in dissolution) or the going-concern value of their share. Disputes over the valuation method dominate buyout litigation.

When Wind-Up Is the Better Choice

Wind-up dissolves the partnership and sells off the assets. It's appropriate when no partner wants to continue, when the business has lost its market, or when the partners' relationship has deteriorated to the point that buyout valuation cannot be agreed.

• All assets are liquidated and converted to cash
• Liabilities are paid in priority order
• Remaining proceeds distributed per partnership agreement (or pro rata in absence of one)
• The partnership dissolves and ceases to exist

The Tax and Operational Trade-Offs

Buyouts let the business continue but lock in a payout obligation. Wind-up captures full value but ends the enterprise. Tax treatment differs sharply: a buyout's payment to the departing partner can often be structured as a redemption (capital treatment); wind-up generates ordinary tax events on liquidated inventory and depreciated assets.

Strategy When the Partnership Agreement Is Silent

Roughly half the partnerships I see in litigation have no written partnership agreement, or have one drafted years ago that doesn't address the current dispute. Nevada's default UPA rules apply, but they're often suboptimal. The first step in any partnership dispute is a careful read of what was actually signed — and what wasn't.