Partnership: Dissolution and Dissociation. CPA Exam REG

In this video, I explain the dissolution and dissociation of partnership.
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Dissociation in a general partnership refers to a change in the makeup of the partnership due to a partner ceasing their association with the business. This process doesn't automatically lead to the dissolution or winding up of the partnership. Here's a clearer explanation of the process and its implications:

Termination Through Dissociation:

Dissociation happens when a partner withdraws, passes away, declares bankruptcy, is expelled, or if a specific event mentioned in the partnership agreement occurs that leads to their dissociation.
In a partnership without a fixed duration (a partnership at will), any partner can end their association with the partnership at any time through a notice of withdrawal.
Consequences of Dissociation:

Once dissociated, a partner loses their rights to participate in the management of the partnership. However, their authority to act on behalf of the partnership might still appear valid to third parties until those parties are notified of the dissociation.
Liability After Dissociation:

A dissociated partner remains liable for debts and obligations incurred by the partnership before they left, unless there is a release by the creditor or a novation (a legal substitution of a new obligation for the old one).
For debts incurred by the partnership after dissociation, the dissociated partner may still be liable for up to two years unless they give notice of their dissociation.
If a new partner joins the partnership, they are not personally liable for debts incurred before their admission.
For example, in a partnership called "Green Gardens," if one of the partners, Jane, decides to leave the partnership, this is an event of dissociation. Following her departure, Jane no longer has a say in the management, but she might still be liable for certain debts incurred while she was a partner. Green Gardens needs to inform relevant parties of Jane's dissociation to limit her apparent authority and potential liability for new debts.







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