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Simple English definitions for legal terms
nonliquidating distribution
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A quick definition of nonliquidating distribution:
A nonliquidating distribution is when a company or partnership gives out some of its assets to its shareholders or partners without going out of business. This can include giving excess money or property that is not needed for current operations. It is different from a liquidating distribution, which happens when a company or partnership is dissolving and distributing its assets to its owners.
A more thorough explanation:
A nonliquidating distribution is when a corporation or partnership distributes its assets to its shareholders or partners without going out of business. This can include excess capital that is not needed for current operations.
- A corporation distributes a portion of its profits to its shareholders as a dividend.
- A partnership distributes cash to its partners as a return on their investment.
These examples illustrate how a nonliquidating distribution works. The corporation or partnership is not dissolving or going out of business, but is instead distributing some of its assets to its shareholders or partners.