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7 Cards in this Set
- Front
- Back
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Withdrawal of a Partner:
- notice of partner's express will to withdraw - occurrence of agreed-upon event - partner's expulsion, death, bankruptcy or incapacity - appointing a trustee/receiver/liquidator for a partner - termination of a partner that is a business entity (like death); or - redemption by partnership of transferee's interest |
*** Effect: usually no big deal! Partnership buys out withdrawing partner's fair value of her interest and continues.
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Liability of Withdrawn Partner
If before "period of duration" (term), liable for K breach If open-ended (no term), can withdraw at any time w/o penalty |
To existing creditors unless released (expressly or impliedly)
To subsequent creditors who believed he was then a partner and was unaware of withdrawal. But a partner can protect himself against this liability by notifying potential creditors of his withdrawal. To other partners if withdrawal was wrongful (in breach of partnership agreement) |
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Apparent authority of withdrawn partner
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For one year after withdrawal to a third party who was unaware of the withdrawal.
But partnership can protect itself by notifying potential creditors of withdrawal. |
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Winding up a partnership
Partners who haven't wrongfully withdrawn may wind up. A partner may have apparent authority to bind partnership after event requiring winding up, even if he's not winding up (assuming 3d party innocent and didn't know)! Partnership can protect itself by notifying potential creditors of the event (jointly/severally liable on obligations, if not) |
Certain events require winding up:
- event that makes business illegal -sale of all assets outside usual course of business - entry of a judicial decree - if built-in ending occurs orall partners consent - in a partnership at will (agreement of a majority-in-interest of partners who haven't assigned partnership interests; or request to wind up from any partner, unless majority-in-interest of partners agree to continue) * majority -in-interest- look at profit share, not # of partners |
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Distribution of Partnership Assets on Winding Up
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1st: to creditors (including partners who are creditors)- all creditors treated on par with third party creditors
2nd: To partners for what is in their capital accounts (contributions + profits - losses) |
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Partnership Assets Insufficient to Cover Liabilities Upon Winding Up
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Split assets pro rata
Partnership losses are borne by partners in same proportions as profit (UOA) |
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Creditors' Rights (left to other law, like federal bankruptcy code)
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Partnership creditors have priority on partnership property
Partnership creditors and a partner's separate creditors have equal claims against separate property |
