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Dissolution of a Partnership firm
A partnership firm is the business entity that’s formed with the sole purpose of taking advantage of the business. Two or more parties close with a proper agreement (known as Partnership Deed) to have and manage the business. Once the aim is met or after the partners plan to put in end to the partnership it must be dissolved and therefore the partnership involves an end. On dissolution of the firm, the business of the firm ceases to exist since its affairs are wound up by selling the assets and by paying the liabilities and discharging the claims of the partners. The dissolution of partnership among all partners of a firm is named the dissolution of the partnership firm. this is often usually done through a dissolution agreement between the partners.
Methods of dissolution of a partnership firm in India
- Dissolution with the intervention of the court: When dissolution is initiated by one partner by suing the opposite then the courts become involved. But a court can dissolve the firm as long as it’s registered with the registrar of firms. Hence an unregistered partnership firm can’t be dissolved by the court. The court may intervene and help within the dissolution in situations where one partner becomes incapable to hold out his duties thanks to incapability, or unsoundness of mind if a partner is guilty of misconduct which will harm the business, repeated breach of the partnership agreement by a partner. In these situations, the court may become involved and help the partnership get dissolved legally.
- Dissolution without court intervention: Usually, partnership firms are dissolved through dissolution agreements between the concerned partners. All the partners close and sign an agreement confirming such dissolution and mutually settling all the pending liabilities and accounts among them. Hence there’s no need for any third-party intervention. this might occur for various reasons like insolvency of partner/partners, or Unlawful business carried on within the name of the partnership firm by one among the partner. just in case the term of the decided partnership expires or the task that the partnership was created is finished, Death of 1 of the partners and resignation of a partner. It also can be dissolved by a notice of dissolution sent by one partner in written to all or any other partners.