Definition of Dissolution of partnership firm | Explanation
|Q .no: What are the various circumstances/ forms / ways under which a partnership firm be dissolved?|
A partnership firm is an ‘organization’ and like every ‘organ’ it has to either grow or perish. Thus, dissolution of a firm is inevitable part in the life of partnership firm. Dissolution of a partnership is different from dissolution of a firm.
Dissolution of partnership:
“Where one partner dies, retires or becomes insolvent but the remaining partner continues the business, it is called dissolution of partnership but the firm is not dissolved”.
Dissolution of the partnership may or may not involve the dissolution of the firm.
Dissolution of the firm:
“Dissolution of the firm takes places when the relationship between all the partners comes to an end and the business is closed.”
According to section 39 of partnership act 1932:
“The dissolution of partnership between all the partners of a firm is called the dissolution of a firm”
The dissolution of partnership between all the partners of a firm is called the dissolution of the firm. [Section 39]. As per section 4, partnership is the relation between persons who have agreed to share profits of business carried on by all or any of them action for all.
Thus if some partner is changed/added/goes out, the relation between them changes and hence partnership is dissolved.