Termination

Question 1

Two-Step Process

Answer 1

Requires: (1) triggering event and (2) winding up

Question 2

Triggering Event

Answer 2

(triggers winding up)

• by partners
• by operation of law
• by court order

Question 3

Partnership at will

Answer 3

• open-ended partnership with no fixed termination tied to time or undertaking
• wound up when a partner chooses to withdraw or partners vote to wind up

Question 4

Partnership for Term or Undertaking

Answer 4

winding up occurs when the term expires or when the undertaking is complete

Question 5

Winding up can be triggered by:

Answer 5

1) event in partnership agreement
2) event that makes it unlawful to continue with the partnership
3) judicial determination that the economic purpose is being frustrated

Question 6

Winding Up

Answer 6

-settlement of accounts and liquidation of assets

Question 7

Who May Wind up

Answer 7

• any partner that has not previously withdrawn
• legal representative of the last surviving partner
• any partner, legal representative, or transferee may seek judicial supervision of winding up
• NOT any partner who has not withdrawn may wind up the partnership.

Question 8

Powers of the Person Doing the Winding Up

Answer 8

• may dispose of and transfer partnership property and discharge partnership liabilities
• goal= preserve partnership business to maximize value as a growing concern

Question 9

Priority of Distributions

Answer 9

• creditors have first priority (bills, liabilities, etc)

- then partners

Question 10

Period of Duration

Answer 10

• a partnership is required to wind up its affairs when the partnership agreement provides for a period of duration.
• the partners may avoid winding up and dissolving the partnership if all partners agree to continue the partnership.
• if the partnership business is continued for 90 days following the date provided for dissolution and no settlement or liquidation is made, this is prima facie evidence of an agreement to continue the partnership.

Question 11

Winding Up Process Steps

Answer 11

1) cease to carry on business of any kind except any business that is required for the process of winding up
2) Then, the partners must collect and sell the property of the partnership.
3) Next, the partners must use the proceeds and any remaining funds of the partnership to discharge obligations to creditors, including partners who are creditors.
4) Finally, any remaining funds are distributed to the partners after all creditors have been paid.