General Partnership Dissolution

Question 1

What is the default rule of dissolution?

Answer 1

In the absence of an agreement that sets forth events of dissolution, or that limits partnership’s length or undertaking, a general partnership disolves upon notice of the express will of any one general partnership to dissociate

Question 2

What happens between dissolution and termination?

Answer 2

“Winding up” phase–period between dissolution and termination in which remaining partners will liquidate the partnership’s assets to satisfy creditors

Question 3

Who is liable on contracts entered into during “winding up” period?

Answer 3

• For old business, partners retain liability on all transactions to satisfy creditors who existed when winding up began
• For new business, the general partnership (and partners) retain liability until actual notice to creditors or 90 days after filing statement of dissolution

Question 4

What is the priority of distribution to creditors?

Answer 4

(1) All creditors (inside & outside–all outside non-partner trade creditors plus all partners who have loaned credit to partnership)
(2) Must pay all capital contributions paid in by partners to the partnership (money paid in by partners–not loans)
(3) If anything is left over (“profits” OR “losses”), they are shared equally absent agreement to the contrary