Chapter 16 Q and A

Chapter 16 Q and A - Chapter 16 PARTNERSHIP LIQUIDATION...

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Chapter 16 PARTNERSHIP LIQUIDATION Answers to Questions 1 Dissolution of a partnership terminates the partnership as a legal entity, but the partnership business may continue under a new agreement. When a partnership is liquidated, however, the partnership is terminated both as a legal and as a business entity. Thus, a partnership may be dissolved without liquidation, but it may not be liquidated without dissolution. 2 A simple partnership liquidation is the liquidation of a solvent partnership in which all partners have equity capital and all gains and losses are realized and recognized before any distributions are made to the partners. In simple partnership liquidations, only one cash distribution is made and the amounts distributed to individual partners are equal to their predistribution capital account balances. 3 The priority ranking for the distribution of assets in liquidation pursuant to RUPA is Rank I Amounts owed to creditors other than partners and amounts owed to partners other than for capital and profits Rank II Amounts due to partners after all assets have been liquidated and liabilities paid. 4 The distribution of assets for capital interests (Rank III) prior to the payment of loan balances to the partners (Rank II) is not in accordance with the Revised Uniform Partnership Act. But the partners may agree to distribute cash or other assets for capital interests before all losses on liquidation are known. With
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Chapter 16 Q and A - Chapter 16 PARTNERSHIP LIQUIDATION...

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