3. General Partnership Dissolution

Question 1

Dissolution

Answer 1

A general partnership will dissolve upon any material change in the partnership caused by the death or withdrawal of any single general partner.

Question 2

The Real End of the Partnership is Called:

Answer 2

Termination

Question 3

Winding Up

Answer 3

The period between dissolution and termination in which the remaining partners liquidate the assets to satisfy the creditors.

Question 4

Partnership’s liability for old business

Answer 4

The partnership and therefore its individual general partners retain liability on all transactions entered into to wind up old business by satisfying creditors who existed when winding up began.

Question 5

Partnership’s liability for old business

Answer 5

The partnership and therefore its individual general partners retain liability on brand new transactions during winding up until actual notice of dissolution is given to known creditors and publication notice is given to all potential creditors.

Question 6

Priority of Distribution

Answer 6

1. First, outside creditors must be paid.
2. Second, inside creditors must be paid.
3. Third, capital contributions by partners must be paid. or losses
4. Profits and surplus, if any. (Without an agreement, profits are shared equally.)

Question 7

Who are considered Outside creditors?

Answer 7

All non-partner outside trade creditors.

Question 8

Who are considered Inside creditors?

Answer 8

Partners who have loaned money to the partnership, and have become creditors thereby.