General Partnership Dissollution

Question 1

Dissolution definitions

Answer 1

A. Key definitions

a. Dissolution—more of a process than a fixed moment in time
i. Absence of an agreement that sets forth events of dissolution, default rule is that general partnership dissolves upon notice of express will of ANY ONE GP to dissociate
ii. Limited life, not a corporation
b. The real end of the partnership is called: termination.
c. Winding up phase: period between dissolution and termination in which the remainng partners liquidate the assets to satisfy the creditors

Question 2

Partnership liability upon dissolution

Answer 2

a. Old business during winding up. Partnership and its individual general partners retain liability on all transactions entered into to wind up old business by satisfying creditors who existed when winding up began.
b. New business during winding up.The partnership and therefore individual general partners still retain liability on brand new transactions during winding up until actau notice of dissolution is given to creditors OR until 90 days after filing a statement of dissolution with the state.
c. Partners may waive dissolution and continue the business – any time before winding up is complete through unanimous vote.

Question 3

Priority of distribution on dissolution

Answer 3

b. Rule: Each partner must be repaid his or her loans and capital contributions, plus that partner’s share of any profits, or minus that partner’s share of any losses.

a. Each level of priority must be fully satisfied before beginning the next level. Order of priority:
i. First, partnership must pay ALL creditors, including outside nonpartner 3rd party creditors. ALSO all partners who have loaned money to the partnership and become creditors.
ii. Second, must repay all capital contributions paid into the partnership by partners. Money paid in for a share of profits. Partnership is liable to its own partnersh for full repayment of capital contributions.
iii. Third, profits if any, profits are shared equally among partners, unless there is an agreement that specifies something else.

7. If the partnership only had 700k to distribute→ it would only go to loan repayment. B would get none of his capital contribution back.
   a. BUT THE PARTNERSHIP is still liable to partner b for the 200k capital contribution. This is a loss/ liability.
   b. Partner can go to the general partners for this loss.