Written by attorneys · grounded in primary & secondary sources — see below
The process by which a partnership ceases its business operations and liquidates its assets. Creditors receive payment first. Remaining value is then distributed to owners according to their interests.
Desert Oil LP holds licensing revenue and decides to distribute cash before ending operations. The partners record updated values for each contribution at the moment of the distribution decision. Desert Oil allocates shares according to those stated values and pays a portion of one partner's share directly to a charging-order creditor.
Dixon Foods LLP generates cash from operations and votes to distribute funds before any winding up begins. The partners allocate the cash equally among themselves. One partner later claims an unequal share based on an earlier oral agreement, but the equal allocation controls.
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Duarte Shipping LLC holds cash after selling equipment. The members vote to distribute most of the cash to themselves. A balance sheet prepared at the time shows that remaining assets would fall short of liabilities plus superior preferential rights if the company dissolved that day. The distribution is blocked.
Dominic Drake withdraws from Desert Oil LP while the firm continues operations. He demands an immediate payout of his interest. The remaining partners refuse because they have not voted to make any interim distribution. Drake receives nothing until the partners later decide to distribute.
Diane Dawson sells part of her transferable interest in Dover Bank LLP to an outside buyer. The buyer receives only economic rights. The partnership continues its business without any dissolution or winding up because the transfer alone does not end the firm.
Dover Bank LP plans to distribute cash to its partners before any winding up. Updated financial statements show that after the payout the partnership's assets would be less than its liabilities plus the amount needed to satisfy superior preferential rights in a hypothetical dissolution. The distribution is prohibited.
No. Dissociation ends a person's status as a partner but does not by itself trigger dissolution and winding up of the partnership business. The partnership continues unless a separate statutory or contractual event causes dissolution.
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Partners receive a distribution before dissolution and winding up only if the partnership decides to make an interim distribution. Dissociation alone does not create any right to a distribution.
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A limited partnership may not distribute assets if, after the distribution, its total assets would be less than the sum of its total liabilities plus the amount needed to satisfy superior preferential rights in a hypothetical dissolution and winding up at that time.
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Any distribution made before dissolution and winding up must be shared in equal shares among the partners unless a transfer or charging order requires a different allocation.
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Yes. Shares are determined by the value of each partner's contributions as stated in the required information at the time the partnership decides to make the distribution.
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