Question

A firm is dissolved when the business of the firm becomes ________.

• A. Illegal
• B. legal
• C. Partially illegal
• D. Partially legal

Answer 1

The correct option is A Illegal

Dissolution of partnership firm may take place without the intervention of court or by the order of a court, in any of the specified ways. It may be noted that dissolution of the firm necessarily brings in dissolution of partnership. Compulsory Dissolution is one of the way because of which dissolution of firm may take place. A firm is dissolved compulsorily in the following case:

(a) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;

(b) when the business of the firm becomes illegal; and

(c) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.