13 July 2015
First you need to decide the mode for dissolution of your partnership firm. There are following modes for the same:
Dissolution of Firm:
There is a difference between the dissolution of partnership and dissolution of firm. Dissolution of partnership occurs when a partner ceases to be associated with the business, whereas dissolution of firm is the winding up the business.
In other words, in case of dissolution of partnership, the business of the firm does not come to an end but there is a new agreement between the remaining partners. But in case of dissolution of firm, the business of the firm is closed up. In brief, dissolution of partnership does not imply the dissolution of firm. But, dissolution of firm implies dissolution of partnership also.
Following are the various ways in which a firm may be dissolved: 1. Dissolution by Agreement:
The partnership firm may be dissolved in accordance with a contract already made between the partners. 2. Compulsory Dissolution:
A firm stands compulsorily dissolved under the following circumstances:
(a) By the adjudication of all the partners or of all the partners but one as insolvent, or
(b) By the happening, of any such event that makes the business unlawful. 3. Dissolution due to Contingencies:
A firm stands dissolved on the happening of the any of the following contingencies:
(a) On expiry of partnership period, if constituted for a fixed period.
(b) On completion of the firm’s venture for which the firm was formed.
(c) On the death of a partner.
(d) On the adjudication of a partner as an insolvent. 4. Dissolution by Court:
Under any of the following cases, a court may order the dissolution of a firm:
(a) Any partner has become of unsound mind.
(b) Any partner has become permanently incapable of performing his duties as a partner.
(c) A partner’s misconduct is likely to affect prejudicially the business of the firm.
(d) A partner willfully commits breach of the partnership agreement.
(e) A partner transfers his interest in the firm, but unauthorized, to a third party.
(f) The business of the firm can be carried on at loss only.
(g) It is just and equitable, on the basis of any other reasonable ground, that the firm should be dissolved.
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