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Dissolution of a Partnership: Liabilities and Indemnification

Dissolution of a Partnership:  Liabilities and Indemnification

Partnership Agreements and the Law

If dissolution is caused in any way except in violation of the partnership agreement, or if a partner has wrongfully caused the dissolution and the business is not continued, each partner may require that the partnership’s assets be applied to discharge its liabilities and the surplus applied to pay the net amount owed to each partner, in the absence of any agreement to the contrary.

The ability to compel the liquidation of the partnership’s assets can be a particular problem for the remaining partners if they intend to continue the business when a partner’s successor, e.g. a deceased partner’s executor, needs cash to meet estate liabilities.

Thus to ensure that remaining partners will have the right to continue without interruption, the agreement should include an express waiver of the right to have assets liquidated to discharge liabilities. In return the withdrawing partner of his or her successor in interest should be indemnified and held harmless from partnership liabilities, whether they arose before or after the withdrawal.

The Peck Law Group

About the Author

Attorney Steven Peck has been practicing law since 1981. A former successful business owner, Mr. Peck initially focused his legal career on business law. Within the first three years, after some colleagues and friend’s parents endured nursing home neglect and elder abuse, he continued his education to begin practicing elder law and nursing home abuse law.


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