Also known as: winds up · wound up · winding up · winding-up · liquidation · dissolution
Written by attorneys · grounded in primary & secondary sources — see below
The process of liquidating assets and settling affairs of a dissolved business entity. A dissolved partnership or limited partnership continues solely to discharge obligations to creditors and distribute any surplus according to statutory priorities.
After his divorce from Wendy Wu, Winston West executed a new will omitting her. When they remarried, Winston never changed the will. Upon his death the court revived the earlier provision leaving property to Wendy because the remarriage satisfied the statutory condition for revival.
Walker Valley Produce formed an LLC that borrowed heavily from a supplier. When the LLC dissolved, the supplier sued member Wesley Wong personally. The court dismissed the claim because the debt remained solely the LLC's obligation regardless of dissolution.
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Windham Technologies dissolved and began winding up. It held cash and equipment but owed vendors and a partner who had advanced payroll funds. The general partner applied assets first to vendor invoices and the partner's advances before any distribution to owners.
Wesley Wells and Wendy Wu signed a marital agreement addressing disposition of property on dissolution. When they later divorced, the court enforced the agreement's terms for dividing their assets rather than applying default marital-property rules.
Winslow Aviation dissolved after losing its main contract. The partners continued operations solely to sell inventory, pay creditors, and close accounts. Any new business ventures were barred because the entity existed only for winding up.
Winston West and Wendy Wu executed a premarital agreement eliminating spousal support. After dissolution Wendy qualified for public assistance. The court ordered Winston to pay support sufficient to restore her eligibility despite the agreement's terms.
A dissolved partnership continues only to wind up its business. It must discharge debts, settle affairs, and distribute remaining assets. New business operations beyond these steps are not permitted.
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No. A member's liability for company obligations is not created or increased merely by dissolution. The debt remains solely the company's responsibility.
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Assets must first discharge obligations to creditors, including partners who are creditors. Only after creditors are paid may any surplus be distributed to owners according to their interests.
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A court may require support payments if the agreement's elimination of support would make a party eligible for public assistance at dissolution. The order is limited to the amount needed to avoid that eligibility.
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