Question

Dissolution of partnership changes the existing relationship between _______ but the firm may continue its business as before.

• A. Directors
• B. Partners
• C. Shareholders
• D. Employees

Answer 1

Answer: (B)

Partners

According to section 39 of the partnership act 1932, the dissolution of partnership between all the partners of a firm is called the dissolution of the firm. The act recognizes the difference in the breaking of relationship between all the partners of a firm and between some of the partners; and it is the breaking or discontinuance of relationship between all the partners which is termed as the dissolution of partnership firm.

The dissolution of partnership changes the existing relationship between partners but the firm may continue its business as before. The dissolution of partnership may take place in any of the following ways:

1. Change in existing profit sharing ratio among partners

2. Admission of a new partner

3. Retirement of a partner

4. Death of a partner

5. Insolvency of a partner

6. Completion of the venture, if partnership is formed for that

7. Expiry of the period of partnership, if partnership is for a specific period of time