Partnership Flashcards
What can cause dissolution of a partnership?
a. Without violation of the partnership agreement
(1) The agreed time limit of the partnership ends.
(2) The agreed partnership purpose has been completed.
(3) A partner quits a partnership that has no stated duration. This type of partnership is called a partnership at will. The withdrawing partner has no liability to the other partners since they may withdraw at any time.
(4) A mutual agreement of all partners may terminate the partnership.
b.In violation of agreement. Any partner may dissolve a partnership at any time, but that partner may be liable for damages. The partner has the power, but may not have the right, to dissolve the partnership.
c. By operation of law (done without agreement of the partners)
(1) The business becomes illegal. This automatically terminates the partnership.
(2) Bankruptcy of the partnership or an individual partner. This must be by adjudication and not merely insolvency.
(3) Death of one or more of the partners (This provision can be overridden by agreement of the partners.)
(4) Court decree. A court decree can be obtained based on the following:
(a) If just and equitable to terminate the partnership
(b) Serious misconduct of a partner—such as habitual drunkenness
(c) Incapacity of a partner; cannot perform duties—such as insanity
(d) Business is impractical
(e) Other partner habitually or purposely commits breach of the partnership contract
