Ending a General Partnership

Question 1

Two-Step Process to Terminate Partnership

Answer 1

(1) Dissolution

(2) Winding Up

Question 2

Events Causing Dissolution

Answer 2

(1) Satisfaction of purpose
(2) Agreement of all partners
(3) Express will of any partner (may be liable for breach of partnership agreement)
(4) Expulsion
(5) Death
(6) Bankruptcy
(7) Illegality
(8) Court decree

Question 3

Winding Up

Answer 3

Any partner who has not wrongfully dissolved the partnership can wind up the partnership business

After dissolution, partnership is bound by a partner’s act that is appropriate for winding up the partnership, as well as any act undertaken by a partner that would have bound the partnership before dissolution

Question 4

Rules for Winding Up Partnership Assets

Answer 4

(1) Assets first used to pay off creditors
(2) Next, each partner’s account will be settled (adjusted to reflect gains or losses from the liquidation of partnership assets)

Question 5

Continuation After Dissolution

Answer 5

Before winding up is complete, partnership may resume carrying on its business as if dissolution had never occurred

Question 6

How Does Continuation Occur?

Answer 6

(1) Partners may expressly agree to continue the business by entering a post-dissolution agreement
(2) If the partnership was for term or for a specific undertaking, there is an implied presumption that the partnership will continue

Question 7

Continuation: Payments to Former Partners

Answer 7

Remaining partners must pay partners who wrongfully dissolved partnership, were properly expelled from partnership, or withdrew (or dies) from partnership the value of the partner’s interest

Question 8

If the partnership continues, can creditors that existed before dissolution recover from the continuing partnership’s assets?

Answer 8

Yes, but if a new partner joins, the creditor cannot recover from the new partner personally