General Partnership Dissolution

Question 1

When does a general partnership dissolve?

Answer 1

A partnership dissolves upon any material change in the parnership, including the death or disassociation of any general partner. It is a limited life.

Question 2

What is the real end of a partnership called?

Answer 2

A termination

Question 3

What is winding up?

Answer 3

This is the period between dissolution and termination, in which the remaining partners will liquidate the partnership’s assets to pay off the partnership’s creditors.

Question 4

What is the partnership’s liability to old business?

Answer 4

The partnership and therefore its individual general partners retain liability on all transactions entered into to wind up old business by satisfying creditors who existed when winding up began.

Question 5

What is the partnership’s liability to new business?

Answer 5

The partnership and therefore its general partners retain liability on brand new transactions during winding up until actual notice of dissolution is given to all known creditors and publication notice is given to all potential creditors.

Question 6

What is the priority of distribution when a partnership dissolves?

Answer 6

1. Outside creditors must be paid - all non-partner third party trade creditors must be fully satisfied.

2. Inside creditors must be paid - partners who have loaned money to the general partnership and become creditors.

3. Capital contributions by partners must be paid - partnership is liable to partners for their capital contributions.

4. Profits and surplus, if any - are shared equally without an agreement.