When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to:

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When a partnership is insolvent and a partner has a deficit capital balance, the partner has a legal obligation to contribute cash to the partnership to cover the deficit. This is because partners have joint and several liability in the partnership, meaning that they are each individually responsible for the partnership's debts and obligations. If one partner has a deficit capital balance, the other partners are not obligated to make up the shortfall. Therefore, the partner with the deficit balance must contribute cash to the partnership to meet its obligations. Personal bankruptcy, initiating legal proceedings against the partnership or delivering a note payable to the partnership would not address the deficit and would not fulfill the partner's legal obligation to cover the shortfall.

When a Partnership Is Insolvent and a Partner Has a Deficit