Legal Definitions - equity of partners

Definition: Equity of partners refers to the right of each partner in a business to have the firm's property applied to the firm's debts. This means that if the business owes money, each partner is responsible for paying a portion of that debt based on their ownership percentage in the business.

Example: Let's say that a partnership owns a building that is worth $500,000 and the partnership owes $100,000 in debt. If there are two partners in the business, each with a 50% ownership stake, then each partner would be responsible for paying $50,000 of the debt. This is because each partner has an equal share in the business and therefore an equal responsibility for its debts.

Another example: If a partnership owns a fleet of delivery trucks and the business goes bankrupt, the equity of partners would come into play. The value of the trucks would be used to pay off the business's debts, and each partner would be responsible for a portion of that debt based on their ownership percentage in the business.

Overall, the equity of partners ensures that each partner in a business is responsible for their fair share of the business's debts and obligations.