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Self Reflection

Partnerships dissolve for various reasons such as changes in relationships, bankruptcy, retirement, or death. Upon dissolution, partners must decide how to handle customers and clients, and notify them of any changes according to the Uniform Partnership Act. A partner's duties continue until dissolution is complete, including duties of loyalty and care. However, a partner's duty not to compete with the partnership ends upon dissolution. Dissolution changes the relationship between partners, though business operations may continue under a new partnership agreement. The departure of partners and creation of a new partnership can be tricky as all partners owe each other duties of fairness until dissolution is fully resolved.

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Judy Ann Gazzingan
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60 views1 page

Self Reflection

Partnerships dissolve for various reasons such as changes in relationships, bankruptcy, retirement, or death. Upon dissolution, partners must decide how to handle customers and clients, and notify them of any changes according to the Uniform Partnership Act. A partner's duties continue until dissolution is complete, including duties of loyalty and care. However, a partner's duty not to compete with the partnership ends upon dissolution. Dissolution changes the relationship between partners, though business operations may continue under a new partnership agreement. The departure of partners and creation of a new partnership can be tricky as all partners owe each other duties of fairness until dissolution is fully resolved.

Uploaded by

Judy Ann Gazzingan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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JUDY ANN F.

GAZZINGAN

Why is it necessary to dissolved the partnership if there is a change in the relationship of the
partners?
Partnerships dissolve. Sometime the decision is made to close the business. Sometimes there is a
bankruptcy. Partner negligence, retirement, death, poor cash flow, and change in business practices
are just some of the reasons for closing down.

In most dissolutions of a partnership, the business partners need to decide what will happen to the
partnership itself. A partnership may be dissolved, but that may not end business operations. If the
partnership’s business operations are to continue, the partnership must decide what to do with its
customers or clients, particularly those primarily served by a partner leaving the business. An
ethical partnership will notify its customers and clients of the change and whether and how the
partnership is going to continue as a business under a new partnership agreement. Partners who
are unable to agree on how to notify their customers and clients should look to the Uniform
Partnership Act, Article 8, which outlines the general obligations and duties of partners when a
partnership is dissolved.

A partner’s duties and obligation upon dissolution describe what the departing partner owes to
the partnership and the other partners in duties of loyalty and care, which are the basic fiduciary
duties of a partner prior to dissolution, as outlined in Section 409 of the Uniform Partnership Act.
The one change upon dissolution is that “each partner’s duty not to compete ends when the
partnership dissolves.” The Act states that “the dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business.”1 This may not terminate the partnership’s
business operations, but the partner’s obligations under the dissolved partnership agreement will
end, regardless of how the remaining partners create a new partnership.

The departure or removal of a partner or partners and the resulting creation of a new partnership
may be tricky, because all original partners owe each other the duty of fairness and loyalty until
the dissolution has been completed. All the partners, departing or otherwise, are required to
behave in a fashion that does not hurt business operations and avoid putting their individual
interests ahead of the interests of the soon-to-be-dissolved partnership. Once the partnership has
been dissolved, the departing partners no longer have an obligation to their old business partners.

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