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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.



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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