Partnership Dissociation/Dissolution

Question 1

Dissociation v. Dissolution

Answer 1

Dissociation: Partner withdraws from the partnership.

Dissolution: Business ends and must be wound up.

Question 2

Dissociation Triggers

Answer 2

-express withdrawal
-happening of an agreed event
-valid expulsion
-bankruptcy of a partner
-death or incapacity
-court decision
-termination of a business entity that is a partner

Question 3

Wrongful Dissociation

Answer 3

All: breaches express term in agreement

Term: partner withdraws, is expelled or goes bankrupt before end of term

Liable for damages

Question 4

Effects of Dissociation

Answer 4

1. If dissolution is triggered, business dissolves and is wound up
2. If dissolution is not triggered, business continues and must buy out dissociated partner

Question 5

Dissolution Triggers

Answer 5

At Will: express will to withdraw

Term: expiration of term, consent of all partners, or if at least half of the partners consent within 90 days of a partner’s death/bankruptcy/wrongful dissociation

All: happening of an agreed event, business becomes unlawful, court order (business not practicable), not enough partners for 90 days

LP: consent of all general partners and the limited partners who hold a majority of the right to receive distributions, dissociation of a general partner + consent of partners owning a majority in interest

Question 6

Liability after Dissociation

Answer 6

General partner is liable for pre-dissociation obligations.

Can be liable for post-dissociation liabilities incurred within 2 years of dissociation if the other party reasonably believed he was still a partner and did not have notice of the dissociation.

Public statements of dissociation become effective 90 days after filing.

Question 7

Binding Partnership after Dissociation

Answer 7

A partnership can be bound by an act of a dissociated partner within 2 years of dissociation if the act would have bound the partnership before dissociation and the other party reasonably believed he was still partner and did not have notice of dissociation.

Public statements of dissociation become effective 90 days after filing.

Question 8

Binding Partnership after Dissolution

Answer 8

A partnership can be bound after dissolution by any act appropriate for winding up the partnership’s business.

Public statements of dissolution become effective 90 days after filing.

Question 9

Effects of Dissolution

Answer 9

After dissolution, the creditors must be paid first, then the partners’ capital contributions, then distribute profits/losses.