Dissociation

Question 1

Dissociation (Definition)

Answer 1

The change in relationship among the partners caused by any partner ceasing to be associated in the carrying on of the business.

Question 2

Ways Dissociation Can Occur

Answer 2

Voluntarily: When a partner voluntarily withdraws and gives notice of such withdrawal.

Involuntarily: Where a partner dies or becomes adjudged incompetent, or is expelled from the partnership.

Question 3

Dissociation and the Partnership Agreement

Answer 3

If the dissociation is a breach of an express term of the partnership agreement, it will be a wrongful dissociation. A partner who wrongfully dissociates is liable to the partnership for any damages caused by the dissociation.

Question 4

Dissociation Causing Dissolution

Answer 4

Dissociation does not necessarily cause the dissolution of the partnership. Dissolution can be avoided if the partnership continues and buys out the dissociated partner’s interest based on the greater of the partnership’s liquidation value or the value of the partnership as an ongoing business without the dissociated partner.