Reconstitution of a Partnership Firm

What is Reconstitution of a Partnership Firm?

Reconstitution of a Partnership Firm. Partnership is an agreement between 2 or more people for sharing the gains of a trade carried by all or any 1 of them who is acting for all. Any change in the current agreement is called as reconstitution of the partnership firm.

What is Admission of a Partner?

A current partnership enterprise might take growth or variety of the trade. In such a scenario it might require organisational assistance or additional capital. An opportunity before the partnership enterprise is to admit either partner or partners, when a partner is being admitted to the existing partnership enterprise, it is known as admission of a partner.

Partnership is :

  • An agreement between 2 or more people (also known as partners) for sharing the gains of a trading concern borne by all or one of them acting for all. Any difference in the current agreement leads to reconstitution of the partnership firm
  • This leads to an end of the existing agreement and a novice agreement comes into the picture with a changed association among the members (associates) of the partnership firm and/or their structure. However, the enterprise continues
  • The partners normally resort to reconstitution of the enterprise in diversified methods such as change in profit sharing ratio, admission of a new partner, decease or insolvency of a partner, retirement of a partner

The above mentioned is the concept that is explained in detail about Reconstitution of a Partnership Firm – Admission of a Partner for the class 12 students. To know more, stay tuned to BYJU’S.