Liquidating distribution from partnership
Under an aggregate theory, partners are co-owners of the business; the partnership is not a distinct legal entity.
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 societas provided for an accounting between its business partners, an agency relationship between partners in which individual partners could legally bind the partnership, and individual partner liability for the partnership's debts and obligations.
As the regular English courts gradually recognized the societas, the business form eventually developed into the common-law partnership.
In order to file a bankruptcy, the debtor must reside in the location of filing within the greater part of 6 months (91 days).
The debtor maybe an individual, married couple, corporation, partnership or trust.
The debtor must not have had a previous bankruptcy dismissed for cause within the last 180 days.
Whether earnings are retained in a partnership or distributed to partners has no affect on the taxation of those earnings, since the partners have to pay tax on the earnings whether they are distributed or not.
Earnings are distributed to each partner's capital account from which distributions are charged against.
The most senior claims belong to secured creditors, who have collateral on loans to the business.
These lenders will seize the collateral and sell it—often at a significant discount, due to the short time frames involved.The debtor is required to attend a Section 341 hearing which is commonly called the first meeting of the creditors. Creditors of the debtor are allowed the opportunity to ask questions of the debtor regarding the statements and schedules filed by the debtor with the Court.