Question

Dissolution of the partnership is _________ in nature, as it is dissolved by mutual agreement. Conversely, a firm is dissolved either ________________.

• A. Voluntary, Voluntarily or Temporarily
• B. Temporary, Voluntarily or Compulsorily
• C. Voluntary, Voluntarily or Compulsorily
• D. Unchanged, Voluntarily or Compulsorily

Answer 1

The correct option is C Voluntary, Voluntarily or Compulsorily

A partnership gets terminated in case of admission, retirement, death etc. of a partner. This does not necessarily involve dissolution of firm.

The dissolution of a firm implies the discontinuance of partnership business and separation of economic relations between the partners. In case of a dissolution of a firm, the firm closes its business altogether and realizes all its assets and pays all its liabilities.

There are various differences between dissolution of partnership and dissolution of firm. Under dissolution of partnership, court does not intervene because partnership is dissolved by mutual agreement i.e. voluntary in nature, while in dissolution of firm it can be dissolved by the court's order i.e either voluntarily or compulsorily.