Dissociation and Dissolution Flashcards
What is a partner’s power to dissociate?
A partner’s power to dissociate is a non-waivable right that allows them to withdraw from a partnership at any time.
What must a partner do to exercise their power to dissociate?
The partnership must have notice of the partner’s express will to withdraw.
True or False: A partner who dissociates wrongfully is liable for damages caused by the dissociation.
True.
While a partner always has the power to withdraw, a partner **may no
What constitutes wrongful dissociation?
Dissociating in violation of an express provision of a partnership agreement.
Also, if the partner does not give the partnership notice.
List events that can cause a partner’s dissociation.
- Partner’s death
- Partner’s bankruptcy
- Appointment of a guardian for a partner
- Judicial determination of incapability
- Event specified in the partnership agreement
What happens if a partner dissociates before the completion of a definite term or undertaking?
It is generally considered a wrongful dissociation.
A partner who wrongfully dissociates is liable to the partnership **and*
What is the consequence of dissociation regarding a partner’s management rights?
Dissociation terminates a partner’s right to co-manage and conduct partnership business.
What must a partnership do regarding the buyout price for a dissociated partner’s interest?
The buyout price must equal the greater of either the liquidation value or the value of the partnership’s assets based on a sale of the entire business as a going concern.
What is a partnership’s dissolution?
Dissolution is the process of winding up a partnership’s business after it has been legally dissolved.
Causes of a partnership’s dissolution include what key factors?
- Court application by an individual partner
- Economic purpose of the partnership being unreasonably frustrated
- Business conduct of a partner making partnership impracticable
What happens if a partnership is at will and a partner expresses their will to withdraw?
Dissolution will occur when the partnership has notice of the partner’s express will to withdraw.
What is the time frame for a partnership to dissolve after a wrongful dissociation?
The partnership will dissolve 90 days after the wrongful dissociation unless a majority of partners agree to continue.
What is the role of partners during the winding up process?
Partners must exercise the duty of loyalty, duty of care, and duty to disclose.
Fill in the blank: A partner who _______ from a partnership may participate in winding up.
[properly withdraws]
What debts are incurred during the winding up phase?
Partnership debts incurred during winding up are shared by all partners.
In the winding up process, to the extent further contributions are required from the partners in order for the partnership to meet all its obligations, each partner will be ___________________.
jointly and severally liable for the entire amount of the outstanding debt.
To the extent partners pay more than their share of the outstanding debt, they may seek contribution from those partners who have not paid their share of the debt.
What happens to the partnership’s assets during winding up?
- Discharge obligations to creditors
- Reimburse partners for capital contributions
- Allocate any balance to partners according to profits
What happens when the winding up of a partnership is complete?
The partnership terminates.
