How are assets distributed after the dissolution of a general partnership?
What will be an ideal response?
After partnership assets have been liquidated and reduced to cash, the proceeds are distributed to satisfy claims against the partnership. The debts are satisfied in the following order:
a. Creditors (except partners who are creditors)
b. Creditor-partners
c. Capital contributions
d. Profits
The partners can agree to change the priority of distributions among themselves. If the partnership cannot satisfy its creditors' claims, the partners are personally liable for the partnership's debts and obligations. After the proceeds are distributed, the partnership automatically terminates. Termination ends the legal existence of the partnership.
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