What is the difference between dissolution of partnership and dissolution of firm?

Answer 1

Dissolution of a Partnership firm

* Dissolution of a partnership means:-The act of ending of the old Partnership

agreement and a reconstruction of the firm due to admission, retirement and death of a partner. It may or may not close the business.

* Dissolution of a Partnership 'firm' means:-The firm close its business then the assets of the firm are sold and liabilities are paid off and remaining amount is distributed among the partners.

*Cases of Dissolution of Partnership :-

1. In case of change in profit-sharing ratio of the exiting partners.

2. In case of admission of a new partner.

3. In case of retirement of a partner.

4. In case of expulsion of a partner.

5. In case of death of a partner.

6. In case of insolvency of a partner.

7. In case of expiry of the period of partnership.

*Cases of Dissolution of Partnership firm:-

*Without the intervention of the court:

1. When all partners agree to dissolve the firm.[sec.40]

2. Compulsory Dissolution [sec.41]

· When all or one partner of the firm becomes insolvent.

· When business of the firm becomes unlawful.

3. On the happening of any incidents:[sec.42]

· Insolvency of a partner.

· Fulfilment of the object for which the firm was formed.

· Expiry of the period.

4. When any partner giving notice to other partners can dissolve the firm.[sec.43 ]

· By order of the court [sec.44]: cases in which the court may order the dissolution of the partnership firm.

1. A partner has become of unsound mind.

2. When a partner unable to perform his duties as a partner.

3. When a partner is guilty of misconduct.

4. When a partner wilfully, commits violation of law of partnership agreement.

5. When a partner has transferred the whole of his interest in the firm to a third party.

6. The firm cannot be carried on except at a loss.

7. The dissolution is just and equitable due to some other reasons.

*Difference between Dissolution of Partnership and Dissolution of firm:-

s.no.

Dissolution of partnership

Dissolution of firm

I.

Change in the exiting agreement between the partners.

Dissolution of partnership between all the partners of the firm.

II.

The firm continues its business.

The firm dose not continue its business.

III.

Books of accounts may not be closed.

Books of accounts have to be closed.

IV.

Dissolution of partnership dose not mean the dissolution of firm.

Dissolution of firm means the dissolution of partnership also.

V.

It is voluntary nature.

It is voluntary and compulsory nature.

Answer 2

Dissolution of partnership refers to the termination of a partnership agreement between partners, while dissolution of a firm is the process of ending the entire business entity, including its legal existence. Dissolution of partnership may result in the business continuing with remaining partners or winding up, while dissolution of a firm involves liquidating assets and settling debts before formally closing the business.