Dissolution

Question 1

Dissociation - Generally

Answer 1

This is a change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business.

It does NOT necessarily cause dissolution and winding up.

Question 2

Dissociation - Events leading to

Answer 2

(1) Notice of express will to withdraw
(2) Happening of some agreed upon event
(3) Valid expulsion of partner
(4) Partner becoming bankrupt
(5) Death of an individual partner or termination of partner that is a business
(6) Decision by court that partner is incapable of performing duties

Question 3

Dissociation - Wrongful

Answer 3

Dissociation can be wrongful if in breach of express terms, leaves before particular undertaking, is expelled, or becomes bankrupt.

Question 4

Dissociation - Consequences

Answer 4

Partner’s right to management ceases, duties terminate (except with matters arising before dissociation).

If p’ship continues, p’ship must buyout the dissociated partner’s interest based on the greater of (1) p’ships liquidation value, or (2) value of p’ship going on without partner.

If purchase, p’ship must indemnify the dissociated partner against liabilities incurred before dissociation and liabilities after unless incurred by acts of the dissociated partner.

P’ship is bound by dissociated partner for two years if other party (1) reasonably believed the dissociated partner was a partner, and (2) did not have and was not deemed to have notice of dissociation.

Question 5

Dissociation - Partner’s Liability

Answer 5

For obligations incurred prior, dissociated partner remains liable.

For obligations incurred after, can be liable within two years if other party believed they were still a partner and did not have notice.

Question 6

Dissolution - Generally & Events Leading To

Answer 6

Can be dissolved at any time if no express agreement.

Events leading to:

• notification by a partner that they want to withdraw
• if p’ship for particular taking, if (1) within 90 days after a partner’s death, bankruptcy or wrongful dissociation, the express will of at least half of the remaining partners to wind up the business; (2) a partner has engaged in conduct making it not reasonably practicable to carry on the business, or (3) the business cannot practicably be carried on in conformity with the p’ship agreement
• happening of an event
• judicial decree

Review page 18

Question 7

Dissolution - Partner’s Power to Bind

Answer 7

Partnership is bound by a partner’s act after dissolution if it is appropriate for winding up, there person did not have notice.

Question 8

Dissolution - Winding Up

Answer 8

P’ship continues after dissolution until the winding up is complete.

Anytime after dissolution but before winding up, p’ship may decide to continue by unanimous vote.

Question 9

Distribution of Assets

Answer 9

Order of distributions: (1) creditors (both inside and outside), (2) capital contributions, (3) profits