There are many types of activities in a business. A partnership firm is also a type of business, but most people are very confused about the dissolution or dissolution of a partnership firm, so in today’s new article, all the doubts and concepts related to the dissolution of a partnership firm have been easily defined.
Dissolution or dissolution of a partnership firm are both the same words, so do not get upset if you find dissolution at the place of dissolution in the next post.
What is meant by Dissolution of partnership?
Any change in the relationship of all the partners of a firm is called dissolution or dissolution of the partnership. Thus, whenever a new partner enters the firm or an existing partner retires and dies due to some reason, the firm is reconstituted. In all circumstances in which the partnership is reconstituted, the partnership is dissolved. In case of dissolution of the partnership, the firm continues to be reorganized.
For example, on the retirement or death of a partner, the remaining partners can continue the business of the firm.
Winding Up Of Partnership Firm
According to Section 39 of the Indian Partnership Act 1932, when the partnership between the partners in a firm comes to an end and the business of the firm ceases to exist, it is called ‘dissolution or winding up of the partnership firm’.
To settle the accounts on dissolution/dissolution of partnership firm, total assets of the firm are sold and all external liabilities are paid. For this, some articles are made in the book of the firm which is given in this way.
What do you understand by the dissolution of a partnership firm?
Dissolution of the firm means the closure of the business of the firm when all the partners break the relationship with the firm, its general meaning is the termination of the partnership between all the partners. On dissolution of the firm, the assets of the firm are sold and the liabilities are paid off.
According to Section 39 of the Indian Partnership Act 1932, the dissolution of a partnership between all the partners of a firm is called the ‘dissolution of the firm’.
The dissolution or dissolution of a partnership firm means such termination of business and break-up of economic relations between the partners.
Differentiate between a dissolution of partnership and dissolution of the firm.
The following are the differences between the dissolution of a partnership and the dissolution of a firm, which are as follows in the row below –
Dissolution of Partnership
Dissolution of partnership refers to the change in the existing relationship between the partners whereas dissolution of the form means the complete cessation of mutual relations between all the partners.
Continuity of business
In this, the business of the firm continues on the dissolution of partnership whereas on the dissolution of the firm, the business of the firm ceases.
The court does not interfere in the case of dissolution of partnership whereas the court can intervene in the case of dissolution of the firm.
Dissolution of partnership is voluntary i.e. it depends on the will whereas dissolution of the firm can be both voluntary and compulsory.
It is not mandatory on the dissolution of a partnership whereas dissolution of a partnership is mandatory in the case of dissolution of the firm.
Closing of Books of Accounts
There is no need to close the books of account on the dissolution of partnership as the business does not come to an end whereas in the case of dissolution of the firm all the books of account of the firm have to be closed.
Settlement of assets and liabilities
In the dissolution of the partnership, the assets and liabilities are revalued whereas in the case of dissolution of the form the assets are recovered and the liabilities are paid.