Question

In the liquidation of a limited liability partnership, a loan payable to a partner by the partnership is:

A) Paid immediately after all outside creditors have been paid in full
B) Considered to be the same as the partner's capital account
C) Used to absorb the partner's share of losses on realization of assets
D) Considered to be a liability of the partnership

Answer 1

In the liquidation of a limited liability partnership, a loan payable to a partner is considered a liability of the partnership and is paid after all outside creditors have been satisfied.

Step-by-step explanation:

In the liquidation of a limited liability partnership (LLP), debts and claims are paid out in a specific order. A loan payable to a partner by the partnership is considered a liability of the partnership. This liability is typically settled after all outside creditors have been fully satisfied. It is not immediately considered the same as the partner's capital account, nor is it used to absorb the partner's share of losses on the realization of assets. In the event of liquidation, the partner's loan is paid back only after the partnership's other liabilities have been settled, following the legal priorities established for the LLP's liquidation process.