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Partners should know what they are entitled to at dissolution

On Behalf of | Apr 15, 2024 | Business Law

There are many reasons why Indiana business partners may want to dissolve the partnership. It could be due to one leaving the business, disputes between the partners, different objectives, retirement, cashing out or simply deciding to part ways without rancor.

It’s important that the partners know the rules to settling accounts. This can be critical financially for them as individuals and for the business as they move on.

Know how to address assets, liabilities and other issues

When splitting the property, the partners should detail all assets that have been accumulated. These include the partnership property and contributions each has made. Contributions include what must be provided by each to satisfy the liabilities of the partnership. For example, if there are outstanding bills, the contributions are expected to cover them.

The partners must also recognize the liabilities and what they might be. Many businesses have loans that need to be repaid. They could have outstanding debt with entities that provided supplies. They could owe money to distributors, maintenance companies and contractors.

Payments must be made to creditors before partners. If other partners are owed compensation apart from capital and profits, they must be repaid. Next will be repayment of capital followed by profit.

A partnership agreement typically provides a way in which the assets will be divided once the partnership ends. This can supersede what the law says about dividing property.

Whether it is an amicable parting of the ways or a contentious one, partners who are dissolving their partnership need to be prepared for every eventuality. Part of that is being fully aware of the law regarding distribution of assets and liabilities.

These issues can be resolved with proper guidance that is experienced in all areas of business law.

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