Partnership Dissolution

Partnership Dissolution due to changes in ownership interests occurs

for variety of reasons:

1. Admission of a partner
2. Retirement of a partner
3. Death of a partner
4. Incorporation of a partnership
1. ADMISSION OF A PARTNER

A. Purchase of all or part of the interest of one or more of the existing partners

1. Purchase from one partner

2. Purchase from all partners
ADMISSION OF A PARTNER

B. Investment of Assets in the partnership by the incoming partner

1. New Partner’s Investment (contributed capital) equals new partner’s proportion of the partnership book value (agreed capital)
2. New Partner’s Investment (contributed capital) is MORE than the new partner’s proportion of the partnership book value (agreed capital)
3. New Partner’s Investment (contributed capital) is LESS than the new partner’s proportion of the partnership book value (agreed capital)
2. WITHDRAWAL OF A PARTNER

1. Settlement equals withdrawing partner’s interest

2. Settlement is MORE than withdrawing partner’s interest
3. Settlement is LESS than withdrawing partner’s interest
3. DEATH OF A PARTNER

A. ESTATE –entitled to receive the amount of his interest

B. CAPITAL ACCOUNT of the deceased partner should be transferred to liability account pending settlement
C. Share of the deceased partner:
1. Pro-rata share of profit from the beginning of accounting period until the time of death
2. Share of the profit for the full period
4. INCORPORATION OF A PARTNERSHIP

1. Partnership Books Retained

2. New Books Opened for the Corporation