Tennessee Code Annotated

Tenn. Code Ann. § 61-1-701 (2026)

Purchase of dissociated partner's interest

✓ current as of May 2026

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(a) If a partner is dissociated from a partnership without resulting in a dissolution and winding up of the partnership business under § 61-1-801, the partnership shall cause the dissociated partner's interest in the partnership to be purchased for a buyout price determined pursuant to subsection (b). Notwithstanding this subsection (a), with respect to a family partnership, this section does not apply to a dissociated partner's interest to the extent provided in § 61-1-603(a).

(b) The buyout price of a dissociated partner's interest is the amount that would have been distributable to the dissociating partner under § 61-1-807(b) if, on the date of dissociation, the assets of the partnership were sold at a price equal to the greater of the liquidation value or the value based on a sale of the entire business as a going concern without the dissociated partner and the partnership were wound up as of that date. Interest must be paid from the date of dissociation to the date of payment.

(c) Damages for wrongful dissociation under § 61-1-602(b), and all other amounts owing, whether or not presently due, from the dissociated partner to the partnership, must be offset against the buyout price. Interest must be paid from the date the amount owed becomes due to the date of payment.

(d) A partnership shall indemnify a dissociated partner whose interest is being purchased against all partnership liabilities, whether incurred before or after the dissociation, except liabilities incurred by an act of the dissociated partner under § 61-1-702.

(e) If no agreement for the purchase of a dissociated partner's interest is reached within one hundred twenty (120) days after a written demand for payment, the partnership shall pay, or cause to be paid, in cash to the dissociated partner the amount the partnership estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest under subsection (c).

(f) If a deferred payment is authorized under subsection (h), the partnership may tender a written offer to pay the amount it estimates to be the buyout price and accrued interest, reduced by any offsets under subsection (c), stating the time of payment, and the other terms and conditions of the obligation.

(g) The payment or tender required by subsection (e) or (f) must be accompanied by the following:
- (1) A statement of partnership assets and liabilities as of the date of dissociation;
- (2) The latest available partnership balance sheet and income statement, if any;
- (3) An explanation of how the estimated amount of the payment was calculated; and
- (4) Written notice that the payment is in full satisfaction of the obligation to purchase unless, within one hundred twenty (120) days after the written notice, the dissociated partner commences an action to determine the buyout price, any offsets under subsection (c), or other terms of the obligation to purchase.

(h) A partner who wrongfully dissociates before the expiration of a definite term or the completion of a particular undertaking is not entitled to payment of any portion of the buyout price until the expiration of the term or completion of the undertaking, unless the partner establishes to the satisfaction of the court that earlier payment will not cause any material hardship to the business of the partnership. A deferred payment must bear interest.

(i) A dissociated partner may maintain an action against the partnership, pursuant to § 61-1-405(b)(2)(B), to determine the buyout price of that partner's interest, any offsets under subsection (c), or other terms of the obligation to purchase. The action must be commenced within one hundred twenty (120) days after the partnership has tendered payment or an offer to pay or within one (1) year after written demand for payment if no payment or offer to pay is tendered. The court shall determine the buyout price of the dissociated partner's interest, any offset due under subsection (c), and accrued interest, and enter judgment for any additional payment or refund. If deferred payment is authorized under subsection (h), the court shall also determine the other terms of the obligation to purchase. The court may assess reasonable attorney's fees and the fees and expenses of appraisers or other experts for a party to the action, in amounts the court finds equitable, against a party that the court finds acted arbitrarily, vexatiously, or not in good faith. The finding may be based on the partnership's failure to tender payment or an offer to pay or to comply with subsection (g).

Amended by 2024 Tenn. Acts, ch. 695,s 10, eff. 7/1/2024.

Acts 2001, ch. 353; 2002, ch. 563, § 3.

Notes of Decisions

Cited in 4 cases (1 in the last 5 years), 2010–2022 · leading case: Moran v. Willensky, 339 S.W.3d 651 (Tenn. Ct. App. 2010).

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Moran v. Willensky, 339 S.W.3d 651 (Tenn. Ct. App. 2010). “ef, with or without an accounting as to partnership business, to: (1) Enforce the partner’s rights under the partnership agreement; *663 (2) Enforce the partner’s rights under this chapter, including: (A) The partner’s rights under §§ 61-1-401, 61-1-403, or 61-1-404; (B) The…”

Stephen Boesch v. Jay R. Holeman (Tenn. Ct. App. 2022). · cites it 17× “Harwell’s report, extensive and informative though it is, does not contend 3 with Tenn. Code Ann. § 61-1-701 . As the Trial Court’s valuation decision was based upon Harwell’s report applying a lack of control and lack of marketability discount to Boesch’s minority partnership…”

Stephen Boesch v. Jay R. Holeman (2020). · cites it 10× “e, was flawed in the following ways: (1) Harwell’s report relied wrongly on profit and loss statements that recorded loan repayments instead of owner draws; (2) Harwell’s report relied wrongly upon profit and loss statements that reported exorbitant salaries and rent payments as…”

Helen Butler v. KBK Outdoor Advert. (Tenn. Ct. App. 2020). · cites it 2× “§§ 61-1-701(a), (b) (2018). The Kettles moved for summary judgment.”

— Tenn. Code Ann. § 61-1-701(a) — 1 case

Helen Butler v. KBK Outdoor Advert. (Tenn. Ct. App. 2020). “§§ 61-1-701(a), (b) (2018). The Kettles moved for summary judgment.”

— Tenn. Code Ann. § 61-1-701(b) — 2 cases

Stephen Boesch v. Jay R. Holeman (Tenn. Ct. App. 2022). “Harwell’s report, extensive and informative though it is, does not contend 3 with Tenn. Code Ann. § 61-1-701 . As the Trial Court’s valuation decision was based upon Harwell’s report applying a lack of control and lack of marketability discount to Boesch’s minority partnership…”

Helen Butler v. KBK Outdoor Advert. (Tenn. Ct. App. 2020). “§§ 61-1-701(a), (b) (2018). The Kettles moved for summary judgment.”

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