Austin withdraws from a partnership and the remaining three partners decide to continue in business. Discuss the effect of the withdrawal on the partnership and on creditors rights under the UPA
Any change in membership dissolves a partnership and, if the partners decided to continue in business, they form a new partnership. The creditors of the old partnership may pursue their claims against the new partnership and also may proceed to hold all of the members of the dissolved partnership personally liable. If Austin has made arrangements with the continuing partners whereby they assume and pay all debts and obligations of the firm, Austin is still liable to creditors whose claims arose before the dissolution. If Austin is forced to pay such debts, he has a right of indemnity against the former partners who agreed to pay the debts but failed to do so.
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