Chapter 2: Partnership Changes and Termination

Question 1

Converting a partnership

Answer 1

Converting into a new business entity is out of the ordinary course of business.

Requires unanimous consent

Requires a statement of conversion w/ Sec of State; also need to file whatever is required of the new entity

Partners remain liable for pre-conversion debts

Converting to a partnership, partners would not be liable for pre-conversion debts where there was limited liability pre-conversion

Question 2

Merger

Answer 2

2 or more partnerships can merge; merged entity goes out of existence

All property and liability of the parties to the merger become the property and obligations of the surviving entity

Each party must approve a plan of merger

Merger is effective upon a filing of articles of merger with the Secretary of State

Question 3

Process for termination of a partnership

Answer 3

Dissolution and winding up

Winding up includes liquidation: paying creditors and after payment, distributing the in complete liquidation with respect to partners capital accounts. Default rule, negative capital account, must contribute that amount back.

Dissolution for an at-will partnership occurs when any partner gives notice of withdrawal.

For partnerships w/ definite terms or formed for a specific undertaking, dissolution occurs when the term ends, the undertaking is completed, or all partners agree. A singled partner can resolve, but subject to breach of K.

Once dissolved, if the remaining partners continue a new at will partnership is formed.

After dissolution, may only continue for the purposes of winding up.