In finance and economics, liquidation is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations as and when they come due. Bankruptcy Code governs liquidation proceedings; solvent companies can also file for Chapter 7, but this is uncommon.
The company’s operations are brought to an end, and its assets are divvied up among creditors and shareholders, according to the priority of their claims. Not all bankruptcies involve liquidation; Chapter 11, for example, involves rehabilitating the bankrupt entity and restructuring its debts.
This means that the business assets of a general partnership are typically titled in one or more partner's names, and extensions of credit use the Social Security number of a partner.
Liquidating a general partnership often entails determining what portion of the company's assets and obligations will be assigned to each partner.
This is not the same as its debts being discharged, as happens when an individual files for Chapter 7.
The debts still exist in theory, at least until the statute of limitations has expired, but there is no debtor to pay them, so they must be written off in practice.
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A general partnership operates under the personal responsibility of the partners.
Each partner is personally responsible for business obligations and claims.
A Partnership Dissolution Agreement is an agreement between two or more partners to terminate a business partnership.
This Agreement sets out the division of the business assets and liabilities between the partners and the process for dissolving the business.