5. Dissociation

Question 1

Dissociation

Answer 1

The act of a partner leaving a partnership

Question 2

What is required for dissociation?

Answer 2

At-will partnership

• Notice (express will to withdraw)
• Agreed event
• Valid expulsion
• Partner’s death/incapacity
• Court judgment
• Termination of partnership

Term partnership (wrongful dissociation)

• Before term expiration
• Before completion of specific purpose
• Partner’s bankruptcy

Question 3

What is the difference between at-will partnership and term partnership?

Answer 3

At-will partnership
- Mutual termination

Term partnership
- Termination after end of term

Question 4

When is a dissociating partner entitled to buyout?

Answer 4

Rightful dissociation
- At time of dissociation

Wrongful dissociation
- After term expiration
- After completion of specific purpose
- Offset vs damages due to partner’s dissociation

Question 5

What is buyout?

Answer 5

Partner can dissociate by selling his shares to the partnership in return for profits (equal/by agreement)

Question 6

What is required for the dissociating partner/partnership’s liability to third parties for dissociating partner’s act?

Answer 6

1) Act would have been bound before dissociation

2) TP reasonably believed dissociating partner was still in partnership + TP had NO knowledge of dissociation

Question 7

How long is the dissociating partner/partnership liable to third parties?

Answer 7

2 years after dissociation

Question 8

What is required for the dissociating partner/partnership removing liability to third parties?

Answer 8

Notice re dissociation to TP

Notice re dissociation to Secretary of State
- Deemed to have notice within 90 days