What is Dissolution of Partnership?

Dissolution of partnership and the dissolution of the partnership firms are two different concepts. In this, we will study the dissolution of the partnership.

Dissolution of Partnership means a change in the business relationship between the two different partners whereas the dissolution of the partnership means the dissolving of the firms or business along with the relation of the two partners. 

Ṭhe dissolution of a partnership is said that to take place when one of the partners of the firm or business is associated with the business, Ceased to be a part of the business which are going in the forward direction. It is very difficult to terminate the partnership. After the dissolution of the firm the remaining partners can be easily carried on the partnership but this type of partnership is a fully new and unique partnership.

Reasons for Dissolution of Partnership:

There are many reasons for the dissolution of the partnership which are listed below:

  • Death of a Partner.
  • Admission of a new partner.
  • Insolvency of existing partners.
  • Early retirement of a partner.
  • Due to the expiry of the partnership deed period after a certain time duration is commonly agreed upon by all the partners.

How is a partnership dissolved?

Dissolution of Partnership

Basically, a partnership dissolved when the partners are participating in the business operations. It can be done by three methods:

  • By this act, when a partner wants to dissolve the partnership at a time duration. For instance, the partners can come to an agreement that a partnership should continue for at least a time duration of 5 years. Sometimes, it can be mentioned that the partner can be suspended under specific conditions. If any partner breaks the rules then they have the right to dissolve the partnership.
  • The partnership is a consequence of an agreement that is governed through the law. 
  • In this, the partner can demand partnership dissolution only under this type of conditions: the partners incapabilities of the work:  and breach of the agreement of a partner and when the partner is mentally unstable and then the misbehaviour of the partner which impacts the partnership.

There are some topics where the dissolution of partnership take place:

  1. Dissolution by Agreement:In this partnership the firm may be dissolved if all the partners in a company agree for the dissolution or in accordance with the terms of the agreement.
  1. Dissolution by notice: This type of partnership is formed at the will , then the dissolution of the firms can take place if there is any of the partners give the notice in the written form to the other partners who are indicating his intention to dissolve the firms.

3.Contingent Dissolution: In this the partnership may be dissolved on the happening of the different situations: 

  • When the time of expiry of the terms and if the partnership is formed for a fixed duration of time.
  • When there is the completion of the specific venture for which the partnership is made.
  • When the death of the partner.
  • When the insolvency of the partner.

4.Compulsory Dissolution: There is dissolution of the firm in the following situations only:

  • At the time of one partner insolvent.
  • The business of the firm becomes illegal due to some specific reason.
  • The business of the firm becomes unlawful because of the event.

5. Dissolution by Court: When the court orders then there will be dissolution of the firm.

  • A partner becomes insolvent.
  • A partner becomes permanently incapable of performing his dues as the partner.
  •   A partner is guilty for the misconduct which can be more likely to be affects the reputation of the firm