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Dissolution of firm

The term dissolution of a firm may be defined as putting an end to a partnership between all the partners i.e. closing down the firm as a whole. According to Sec. 39, “The dissolution of partnership between all partners of a firm is called the dissolution of firm”. In this case, the business of the firm is stopped and the relations between all the partners come to an end. Dissolution of a firm marks the end of the functioning life of the firm. It marks the discharge of the contract which had created the firm.

 

Example

Ram, Shyam and Gopal were partners in a firm. After some time, Ram dies and the firm was closed down. In this case, the firm is dissolved and the relations between all partners come to an end.

 

Note: Dissolution of partnership may or may not result in dissolution of firm, but dissolution of firm necessarily means dissolution of partnership.





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