One of the most unfortunate events in a partnership is a possible dissolution. In most cases, it is clearly not the objective or hope of a partnership to have to fold at some point. When this unfortunate reality comes to fruition, there are a lot of questions left for the partners to answer. One of the most pressing issues revolving around a partnership dissolution is how to divide the remaining partnership assets, whether they be liquid or not. It is important to understand the considerations a court takes into account when attempting to determine what an equitable distribution of partnership assets is.
First, a court determines what outstanding debts and liabilities the partnership holds. In many instances, a partner has likely taken on personal expenses on behalf of the partnership without having been paid back for his or her expenses. In such an instance, that partner will be indemnified for others’ shares of the expenses prior to the divvying up of profits.
A court will also look to the behavior of each partner during the life of the partnership. For example, if a partner has engaged in waste of the partnership’s assets, that partner is less likely to receive an equal share of assets. Additionally, if it was the partner’s misbehavior that lead to the wrongful dissolution of the partnership, that partner will most likely look at a far smaller share of partnership assets.
Another huge factor which is often overlooked by partners during dissolution is considering what actually belongs to the partnership. In a common scenario, a partner may lend a personal asset to be used by the partnership. However, that asset may never be considered partnership property. As such, it will not be included in a distribution at the end of the partnership. It will not be considered part of that partner’s distribution from the partnership. Therefore, what is and is not considered partnership property plays a huge role in determining what each partner may receive.
The list of factors a court looks at in determining what would constitute a rightful share of partnership property is not exhaustive. A court carefully attempts to undertake an equitable distribution of partnership property. What is equitable is not often equal. Therefore, it is important to consult with the right legal team to ensure you receive your fair share of partnership assets upon its dissolution. Call the Trembly Law Firm at (305) 431-5678 today to schedule a consultation.