Dissolution of partnership

Please find the below material this will guide you and the attached form:-

Reconstitution of a Partnership Firm - A partnership firm is not a legal entity. It has no perpetual existence as in case of a company incorporated under Companies Act. However, the Act gives the partnership limited rights of continuity of business despite change of partners. In absence of specific provision in partnership deed, death or insolvency of a partner means dissolution of the firm. However, partnership can provide that the firm will not dissolve in such case.

Change in partners may occur due to various reasons like death, retirement, admission of new member, expulsion, insolvency, transfer of interest by partner etc. After such change, the rights and liabilities of each partner are determined afresh. This is termed as reconstitution of a firm.
Dissolution of a Firm - A partnership firm is an ‘organisation’ 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 some time or the other.

Dissolution of a firm without intervention of Court can be (a) By agreement (section 40) (b) Compulsory dissolution in case of insolvency (section 41) (c) Dissolution on happening of certain contingency (section 42) (d) By notice if partnership is at will (section 43).

A firm can also be dissolved by Court u/s 44.

DISSOLUTION OF PARTNERSHIP AND DISSOLUTION OF 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 acting for all. - - Thus, if some partner is changed/added/ goes out, the ‘relation’ between them changes and hence ‘partnership’ is dissolved, but the ‘firm’ continues. Hence, the change is termed as ‘reconstitution of firm’. However, complete breakage between relations of all partners is termed as ‘dissolution of firm’. After such dissolution, the firm no more exists. Thus, ‘Dissolution of partnership’ is different from ‘dissolution of firm’. ‘Dissolution of partnership’ is only reconstruction of firm, while ‘dissolution of firm’ means the firm no more exists after dissolution.

Mode of dissolution of firm - Following are various modes of dissolution of firm. * Dissolution by agreement - [section 40]. * Compulsory dissolution in case of insolvency - [section 41] * Dissolution on the happening on certain contingencies [section 42] * Dissolution by notice of partnership at will [section 43(2)] * Dissolution by the court

Consequences of dissolution of firm - After firm is dissolved, business is wound up and proceeds are distributed among partners. The Act specifies what are the consequences of dissolution of a firm.
Sale of goodwill of firm after dissolution - Business is attracted due to reputation of a firm. It creates a ‘brand image’ which is valuable though not tangible. ‘Goodwill’ is the value of reputation of the business of the firm. Goodwill of a firm is sold after dissolution either separately or along with property of firm. - - As per section 14, property of partnership firm includes goodwill of the firm. - - Goodwill is the reputation and connections which the firm establishes over time, together with circumstances which make the connections durable. This reputation enable to earn profits more than normal profits which a similar business would have earned. Goodwill is an intangible asset of the firm. - -
In settling the accounts of a firm after dissolution, the goodwill shall, subject to contract between the partners, be included in the assets, and it may be sold either separately or along with other property of the firm. [section 55(1)].

Settlement of accounts after dissolution - Accounts are settled after a firm is dissolved as provided in the Act. A firm is said to be ‘wound up’ only after accounts are fully settled.

For said purpose in Delhi you need to file Form VI which i am attaching heewith.

Regards,

Hi Vivek

Partnership was 'at will', so the same is dissolved by dissolution notice as per section 43 of IP Act 1932.

Now during settlement of accounts my partner is demanding Goodwill, after 50 percent of assets & Liabilities.

I told him that we both will not use name of the firm after dissolution so there is no goodwill to both of us.

As far as clients are concerned we should divide them equally and service them by our own with different name.

In this no partner will use name of the firm. Is it ok?

Please suggest.

Deed is attached for your reference.  Firm is 9 months old and done a business of 7 lakhs so far.

best Kiran

As both are not using the firm name and any other intellectual property rights, so there is no matter of goodwill. Rest you can settel mutually.

Regards,

Thanks Vivek

On other side I am fail to understand the meaning of -

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"It is hereby agreed that both the partners shall be working partners of the firm. Aggregate  remuneration payable to the working partners shall be quantified and worked out for each accounting year in the following manner:

i) in respect of book profit upto Rs. 3,00,000/- or in the case of loss @ 90% of the book

profit or Rs. 1,50,000/- whichever is more;

ii) in respect of balance of book profit @ 60%.if you have a look in partnership deed.

The above remuneration shall be accrued at the end of

accounting year and shall be distributed between the partners as under: -

Party of the first part - Ms Poonam Sharma 50%

Party of the second part - Ms Bhawna Sethi 50%"

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request you to please simplify above para?

regards

Kiran

Upto my understanding, it means:-

Both partner will be working partner means they will devote their time to this business and in lieu of that they will be entitled for the remuneration in a accounting year @ 90% of book profit if book profit is upto Rs. 300000 or Rs. 150000 whichever is more. and if the book profit is more than Rs. 300000 then on excess book profit 60% will be distributed to both equally that is 50-50%.

Regards,