Liquidation: Bankruptcy and Partner
INTRODUCTION
Liquidation of a partnership can be define as the winding up of its business activities characterizaed by sale of all non-cash assets, settlement of all liabilities and distribution of the remaining cash to the partners. It is usually done when the business entity will not continue its activities after the dissolution of the partnership. Maybe the partners already fulfilled their business purpose or the partnership is in financial difficulties, that’s why they decided to liquidate it.
The purpose of this paper is to inform the reader on the methods and order of the preferences of partnership liquidation. Also it discuss particularly the steps on performing liquidation and the order of the preferences that it should follow.
The main part of the body is divided into two areas: 1) Definition of partnership liquidation and order of preference; 2) Methods of partnership liquidation and their processes.
DISCUSSION The liquidation of the partnership is the winding up of its business activities characterized by sale of all non cash assets, settlement of all liabilities and distribution of the remaining cash to the partners. The conversion of non-cash assets into cash is reffered to as realization. This may result to a gain or loss on realization and shall be divided in the profit or loss ratio of the partners. In some cases, a substantial loss on realization may yield for a partner a capital deficiency, which is the excess of a partner’s share in losses overthe partner’s capital credit balance. This deficiency will certainly affect the partner’s interest in the partnership.
The liquidation of a partnership occurs after dissolution due to partnership fulfilling its purpose, partners desire to not continue the business, or partnership is in financial difficulty. It may voluntary or involuntary. Voluntary if the partners choose to liquidate the business and involuntary when the creditors force the partnership to liquidate.
Order of Preferences The
Liquidation of a partnership can be define as the winding up of its business activities characterizaed by sale of all non-cash assets, settlement of all liabilities and distribution of the remaining cash to the partners. It is usually done when the business entity will not continue its activities after the dissolution of the partnership. Maybe the partners already fulfilled their business purpose or the partnership is in financial difficulties, that’s why they decided to liquidate it.
The purpose of this paper is to inform the reader on the methods and order of the preferences of partnership liquidation. Also it discuss particularly the steps on performing liquidation and the order of the preferences that it should follow.
The main part of the body is divided into two areas: 1) Definition of partnership liquidation and order of preference; 2) Methods of partnership liquidation and their processes.
DISCUSSION The liquidation of the partnership is the winding up of its business activities characterized by sale of all non cash assets, settlement of all liabilities and distribution of the remaining cash to the partners. The conversion of non-cash assets into cash is reffered to as realization. This may result to a gain or loss on realization and shall be divided in the profit or loss ratio of the partners. In some cases, a substantial loss on realization may yield for a partner a capital deficiency, which is the excess of a partner’s share in losses overthe partner’s capital credit balance. This deficiency will certainly affect the partner’s interest in the partnership.
The liquidation of a partnership occurs after dissolution due to partnership fulfilling its purpose, partners desire to not continue the business, or partnership is in financial difficulty. It may voluntary or involuntary. Voluntary if the partners choose to liquidate the business and involuntary when the creditors force the partnership to liquidate.
Order of Preferences The
References: East Bajac-Bajac, Olongapo City March __, 2011