1. Dissolution of partnership, Dissolution of firm

Dissolution of Partnership & Dissolution of Firm are not the same thing. Whenever there is a change in constitution of the firm, the business of the firm continues. There is a change in constitution in case of admission, retirement & death of a partner. This change leads to dissolution of partnership & not dissolution firm. The relationship between the partners changes but the overall business of the firm continues as usual. However, in the case of dissolution of partnership firm, both the partnership & the business comes to an end. Dissolution of the firm is the end of partnership business. Dissolution of partnership occurs due to the following reasons;

1. Due to the admission of a new partner
2. Due to the retirement of a new partner
3. When a partner is declared insolvent
4. When the profit-sharing ratio is changed

CHAPTER -5

Dissolution  of Partnership  Firm

You have learnt about the reconstitution of a partnership firm which takes place on account of admission, retirement or death of a partner. In such a situation while the existing partnership is dissolved, the firm may continue under the same name if the partners so decide. In other words, it results in the dissolution of a partnership but not that of the firm. According to Section 39 of the partnership Act 1932, the dissolution of partnership between all the partners of a firm is called the dissolution of the firm.
That means the Act recognises the difference in the breaking of relationship between all the partners of a firm and between some of the partners; and it is the breaking or discontinuance of relationship between all the partners which is termed as the dissolution of partnership firm. This brings an end to the existence of firm, and no business is transacted after dissolution except the activities related to closing of the firm as the affairs of the firm are to be wound up by selling firm's assets and paying its liabilities and discharging the claims of the partners.

Dissolution  of Partnership

As stated earlier dissolution of partnership changes the existing relationship between partners but the firm may continue its business as before. The dissolution of partnership may take place in any of the following ways:

1. Change in existing profit sharing ratio among partners
2. Admission of a new partner
3. Retirement of a partner
4. Death of a partner
5. Insolvency of a partner
6. Completion of the venture, if partnership is formed for that
7. Expiry of the period of partnership, if partnership is for a specific period of time