Question

If cash payments to partners of a limited liability partnership in liquidation are delayed until all noncash assets have been realized, any cash remaining after all partnership creditors have been paid is distributed:

A) According to the liquidator's best judgment
B) In the ratio for sharing net income and losses
C) In amounts equal to the partners' loan and capital account balances
D) In some other manner

Answer 1

In the liquidation of a limited liability partnership, after paying off creditors, the remaining cash is distributed according to the partners' capital account balances, reflecting their respective investments and loans to the partnership.

Step-by-step explanation:

When a limited liability partnership is in the process of liquidation, the distribution of any remaining cash after all partnership creditors have been paid is handled in a specific order. This remaining cash is distributed according to the respective amounts in the partners' loan and capital account balances. This ensures that partners recover their respective investments and loans to the partnership after the creditors' claims have been satisfied.

It is crucial to understand that the distribution is not based on liquidator's best judgment or in equal amounts to each partner, nor is it based on the ratio for sharing net income and losses, unless the partnership agreement specifies otherwise. As the liquidation process concludes, the focus is on returning the invested capital to the partners. Each partner's loan and capital contributions are accounted for in these final disbursements.