Massachusetts General Laws

Mass. Gen. Laws ch. 108A, § 40 (2026)

Rules for settling accounts between partners

✓ current as of July 2026

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Section 40. In settling accounts between the partners after dissolution, the following rules shall be observed, subject to any agreement to the contrary:

(a) The assets of the partnership are—

I. The partnership property.

II. The contributions of the partners specified in clause (d) of this section.

(b) The liabilities of the partnership shall rank in order of payment, as follows:

I. Those owing to creditors other than partners.

II. Those owing to partners other than for capital and profits.

III. Those owing to partners in respect of capital.

IV. Those owing to partners in respect of profits.

(c) The assets shall be applied in the order of their declaration in clause (a) of this section to the satisfaction of the liabilities.

(d) The partners shall contribute, as provided by section eighteen (a), except as provided in section fifteen: (i) the amount necessary to satisfy the liabilities and (ii) if any, but not all, of the partners are insolvent, or, not being subject to process, refuse to contribute, the other partners shall contribute their share of the liabilities, and, in the relative proportions in which they share the profits, the additional amount necessary to pay the liabilities.

(e) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in clause (d) of this section.

(f) Any partner or his legal representative shall have the right to enforce the contributions specified in clause (d) of this section, to the extent of the amount which he has paid in excess of his share of the liability.

(g) The individual property of a deceased partner shall be liable for the contributions specified in clause (d) of this section.

(h) When partnership property and the individual properties of the partners are in the possession of a court for distribution, partnership creditors shall have priority on partnership property and separate creditors on individual property, saving the rights of lien or secured creditors as heretofore.

(i) Where a partner has become bankrupt or his estate is insolvent, the claims against his separate property shall rank in the following order:

I. Those owing to separate creditors.

II. Those owing to partnership creditors.

III. Those owing to partners by way of contribution.

Notes of Decisions

Cited in 5 cases, 1989–2017 · leading case: Starr v. Fordham, 648 N.E.2d 1261 (Mass. 1995).

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Starr v. Fordham, 648 N.E.2d 1261 (Mass. 1995). · cites it 3× “G. L. c. 108A, § 40 (6) (1992 ed.). Similarly, if the partnership’s liabilities exceed its assets, then each partner must contribute toward the losses.”

Krasne v. Tedeschi & Grasso, 436 Mass. 103 (Mass. 2002). “He based his claim for 100% indemnification on the assertion that when he left, the partnership had sufficient assets to pay its debt to the landlord, and that under G. L. c. 108A, § 40, it was obligated to do so, thereby freeing him completely from responsibility for the debt.”

Normandin v. Normandin (In Re Normandin), 106 B.R. 14 (Bankr. D. Mass. 1989). “Mass.Gen.L. ch. 108A, § 40 (Law.Co-op.1985).”

Poirier v. Gurnick, 5 Mass. L. Rptr. 47 (Mass. Super. Ct. 1995). “The original complaint was in three counts alleging breach of contract, breach of partnership agreement and violations of G.L.c. 108A, §40 and G.L.c. 93A. The original complaint was dismissed without prejudice and a second complaint was filed in Worcester Superior Court on March…”

Burns v. Taylor, 34 Mass. L. Rptr. 89 (Suffolk Mass. Super. Ct. 2017). “…anything more than the residual profits, if any, from the partnership upon dissolution is not before the Court. See G.L.c. 108A, §40.”

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