in a business. If ‘A’ retires, ‘B’ and ‘C’ can continue the business which is known as dissolution of partnership. The various circumstances leading to dissolution of partnership firm can be summarised by taking the first letters used in the term “Dissolution”. D - Death of partner I - Incapacity of a partner S - Stipulated period of partnership completed in the case of particular partnership S - Serious misconduct of a partner O - Object is completed (Particular partnership) L - Lunacy of a partner U - Unavoidable continuous loss T - Transfer of interest of the firm I - Insolvency of a partner O - Objectionable unlawful objectives N - Notice of dissolution by a partner.
The fundamental difference between the dissolution of partnership and dissolution of the firm is that when the partnership is dissolved, there is no other dissolution, but when the firm is dissolved, partnership too comes to an end. Dissolution of Partnership can take the following forms i. Change in the existing profit sharing ratio ii. Admission of a Partner iii.
Retirement or Death of a Partner iv. Insolvency of a partner. v. Expiry of the term of the partnership.
vi. Completion of the specified venture. vii. Dissolution by agreement.
commerce - - . . PM i. Dissolution of a partnership firm is taken place in two ways.
a. without the order of the court and b. By order of the court. a.
Without the order of the court i. By agreement or mutual consent A firm may be dissolved when all the partners agree to close the affairs of the firm. Just as a partnership is created by contract, it can also be terminated by contract. ii.
By insolvency of all the partners but one If any of the partners adjudged an insolvent (or if all the partners become insolvent) it is necessary to dissolve the firm. iii. When the objective becomes illegal When the business carried on by the partnership becomes illegal, the partnership firm is automatically dissolved.