What is Retirement of a Partner?
A partner may ascertain to either withdraw or retire from the enterprise due to certain reasons such as his bad health, his age, change in enterprise’s nature of a business, etc., In the Partnership at Will, a partner might retire at any time. Retirement leads to a reconstitution of an enterprise where the partners’ contribution ratio and the profit sharing ratio change. The retiring partner is given his share of capital, revaluation profit or loss and goodwill.
What is Death or Insolvency of a Partner?
Death or insolvency of a partner is the outcome in the reconstitution of an enterprise when the remaining partners desire to continue the enterprise. In case of bankruptcy or insolvency, all dues are paid to the bankrupt partner and partnership agreement is terminated as per the law a bankrupt is ineffectual to get into an agreement or a contract. In case of decease, all dues are being paid to the legal successor of the deceased partner.
Any change in the current agreement of partnership leads to reconstitution of the partnership enterprise. Few instances when a reconstitution of a partnership occurs are : Change in profit sharing ratio among the existing partners. Retirement of an existing partner. Admission of a new partner.
The above mentioned is the concept that is explained in detail about the Reconstitution of a Partnership Firm – Retirement/Death of a Partner for the class 12 Commerce students. To know more, stay tuned to BYJU’S.