It is an unfortunate truth that not all businesses work out. This is true whether it be a partnership, Limited Liability Company, corporation, or the like. One of the questions next is how will the remaining partnership assets be paid out. This involves several actors, chiefly inside creditors, outside creditors, and the partners. It is important to know what is due to everybody legally upon such a dissolution.
The order by which everybody is paid is often fairly consistent, with some exceptions. Outside creditors will be paid first. The order of outside creditors will be determined on a pro rata basis. Sometimes equitable subordination may determine that some creditors will have their claims subordinated to others. Next, loans made to the partnership by partners will be repaid. Only then, if there are any assets remaining, will the partners receive their dividends.
In Florida, if the partnership’s dissolution is court-ordered, the partnership assets must be reduced to cash in order to satisfy the obligations of the partnership. If there is any cash left over, distributions will then be made in accordance with respective interests.
If courts become involved in the distribution of assets or cash, it may look to the actions of each partner while the partnership was in existence. If a partner has engaged in waste, that partner may receive less of a share. The distribution, in the eyes of the court, must be equitable, which is not necessarily equal. Further, the operating agreement may come into play to determine how much of a share each partner should receive. If courts become involved, they retain discretion in how to effect an equitable distribution.
When a partnership dissolves, many questions remain regarding how assets are to be distributed. Having the right legal team can help alleviate a lot of concerns and ensure that the distribution is as smooth and equitable as possible. Call the Trembly Law Firm at (305) 431-5678 today to schedule your consultation.