Dissociation

Question 1

What is a partner’s power to dissociate in GP or LLP?

Answer 1

Have the power to dissociate upon giving express notice

While a partner always has the power to withdraw, a partner may not have the right to do so and may be liable for damages caused by wrongful dissociation.

Question 2

What is wrongful disassociation of a partner in GP or LLP?

Answer 2

Dissociation in violation of an express provision of the PA

OR

When a partner withdraws by express will from a partnership that is for a definite term or undertaking, this is generally going to be considered a wrongful dissociation if it occurs before the completion of the term or undertaking.

Question 3

What are the events that cause dissociation of a partner in GP or LLP?

Answer 3

(1) Death
(2) Bankruptcy (wrongful if express term or undertaking partnership)
(3) Appointment of a Guardian
(4) Judicial determination of partner incapability
(5) Occurrence of even in PA that triggers disassociation
(6) Expulsion by provision in PA, unanimous vote of the partners, or judicial determination

Question 4

Dissociation of a general partner in LP

Answer 4

Dissociation is wrongful if it occurs before the termination of the LP

Question 5

Dissociation of a limited partner in LP

Answer 5

No right to disassociate

Question 6

Consequences of Dissociation

Answer 6

(1) Ends the partner’s rights to co-manage and conduct partnership business

(2) Ends the partner’s duties of loyalty and care going forward (still under duty for matters occurring before dissociation) **May compete with the partnership

(3) Partnership must purchase dissociated partner’s interest for a buyout price

Question 7

Liability of a parter that dissociates

Answer 7

Only liable for partnership obligations incurred before dissociation

Question 8

What is buyout price and how does it work?

Answer 8

The buyout price must be equal to the greater of either: (1) the liquidation value or (2) value of the partnership’s assets based on a sale of the entire business as a going concern plus interest

If no agreement to purchase the dissociated partner’s interest is reached within 120 days (after written demand for payment), the partnership must pay the amount the partnership estimates to be the buyout price