The Elm Street Partnership is a limited partnership in which Arlo is the sole general partner and Barbara and Charles are the limited partners. Now the partnership is being dissolved, and Barbara wants her money. The partnership creditors include Charles, for a $1,000 loan, in addition to his capital contribution. In what order should the partnership assets be distributed?
The priorities for distribution of assets upon dissolution of a limited partnership are as follows: (1) creditors, including partners who are creditors; (2) partners and ex-partners in satisfaction of liabilities for unpaid distributions; (3) partners for return of their capital contributions unless otherwise agreed; and (4) partners for their partnership interests in the proportion in which they share distributions unless otherwise agreed. No distinction is made between a general and limited partner in these distributions unless the partnership agreement so provides.
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