Final answer:
During liquidation, the distribution of remaining cash to partners is typically based on the partnership agreement or state law if the agreement does not specify the terms. It comes after satisfying all debts to creditors and takes into account the amount each partner invested.
Step-by-step explanation:
During liquidation, the distribution of any remaining cash to partners is based on the partnership agreement, which determines the order of payment. Typically, the partners are paid after all other obligations, such as debts to creditors, have been settled. If the partnership agreement does not specify the terms, then the distribution is based upon the amount of capital each partner initially invested and any applicable state laws. The process involves three key stages:
- Asset liquidation and converting assets to cash.
- Paying off all of the company's liabilities.
- Distributing the remaining cash to the partners according to the partnership agreement or state law if the agreement is silent on this matter.
Understanding these principles helps partners know what to expect in terms of payouts during the liquidation process.