The assistance of legal and accounting professionals can help smooth this process.
A liquidation marks the official ending of a partnership agreement.
For example, if partner A has ,000 in his capital account and partner B has ,000 after company debt repayments, partner A will receive ,000 and partner B will receive ,000.
If partner A also loaned the business ,000, though, he will receive repayment after the company pays its debts, but before the partners receive the money remaining in their capital accounts.
Sometimes the sale of a company's assets doesn't provide enough money to pay off all the company's debts.
In such a case, the rest of the money comes from the capital accounts of each partner.
First the capital evaporates, and then the company goes into liquidation.
Liquidation is the selling of the assets of a business, paying bills and dividing the remainder among shareholders, partners or other investors. Upon liquidation of certain business, such as a bank, a bond may be required to be posted to assure the proper distribution of assets to creditors.
The company's bookkeeping record includes a total of the amount in this account adjusted for distributions the partner received, additional investments, and the partner's share of company losses.
The liquidation of a partnership starts with a review of the company's assets, including property and cash, and its debts.
When one of several partners cannot pay the owed share of the money, the other partners pay that partner's share, splitting the remaining balance based on agreed-upon loss-sharing percentages.
The partners who did fulfill their obligations can later sue the partner who failed to pay for the money owed if desired.