Also known as: partnership distributions · partnership distrib · distributions from partnership
Written by attorneys · grounded in primary & secondary sources — see below
A payment of cash or property made by a partnership to one of its partners from earnings, as an advance on future earnings, or in partial or complete liquidation of the partner's interest. The default rule requires that such distributions be shared equally among the partners unless the partnership agreement provides otherwise or a charging order redirects payment.
Preston Pratt, Phuong Pham, and Pearl Porter formed a general partnership to operate a consulting firm. After a profitable quarter the partners voted to distribute $90,000 in cash. Preston and Phuong each took $45,000 and refused to pay Pearl anything because a creditor held a lien on her interest. The partnership must still pay Pearl her $30,000 share at the same time, with the creditor receiving that amount to the extent of the lien.
Portia Price and Pierre Poulin operated a law firm as equal partners. After Portia reported suspected billing irregularities the firm voted to expel her and denied her any year-end distribution while continuing to pay the other partner. The withheld distribution must still be calculated and paid according to the equal-share default unless a valid agreement or charging order alters the allocation.
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Yes. The default rule requires equal shares for any distribution made before dissolution and winding up. Partners cannot unilaterally recharacterize the payment as compensation for work or tie it to capital accounts to exclude one partner.
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The lien does not change the allocation among partners. The partnership still computes each partner's share under the default equal rule or contribution values, then redirects the encumbered partner's portion to the creditor up to the amount of the judgment.
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Losses are charged to the partners in the same proportion as their shares of distributions. Under the default rule that produces equal loss sharing among all partners regardless of whether they contributed cash or labor.
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No. During winding up the partnership must first apply its assets to discharge all partnership debts and obligations. Only after creditors are paid may any surplus be distributed to the partners according to their interests.
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…this meeting, Bohatch received no further work assignments from the firm. In January 1991, the firm denied Bohatch a year-end partnership distribution for 1990 and reduced her tentative distribution share for 1991 to zero. In June, the firm paid Bohatch her monthly draw and told her that this draw would be her last. Finally, in August,…