Dissolution of Partnership: Causes and Process

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What is a dissolution of a partnership?

Dissolution of a partnership refers to the change in the partnership relation between all the partners.In some cases, such as a partner leaving or a new partner joining, there may not be any change in the business of the partnership.In other cases, such as a court order or the death/bankruptcy of a partner, dissolution of a partnership may result in complete closure of the business of the partnership firm.

What are the reasons for the dissolution of partnership?

A partnership can be dissolved under the following circumstances:

1. All partners may mutually agree to dissolve the partnership firm.
2. A partner transfers control to a third party by transferring his interest or equity in the partnership firm. Then other partners may dissolve the partnership firm.
3. All partners or all but one partner are declared insolvent.
4. The partnership firm’s business declared illegal by a court.
5. The term of the partnership expires, or the objective of the partnership is completed, depending on the nature of the partnership agreement.
6. One of the partners dies. If there are only two partners, the partnership will dissolve. If there are more than two partners, the partnership will get dissolved, and remaining partners may enter into a new agreement, continuing the business of the partnership firm.
7. A partner gives notice for dissolution, in case the partnership is at-will.

How do you dissolve a business partnership?

If the partnership is registered with the registrar of firms, then one or more partner can file a case in the court to dissolve the firm.Visit Registrar of Firms in Maharastra or Karnataka to register in those states.A partnership is dissolved by winding-up its business affairs, selling its assets, paying off liabilities and discharging the claims of the partners.After winding-up of partnership firm, all partners have to issue a public notice of dissolution. Otherwise, all the partners remain liable for any conduct of any partner in the name of the partnership firm.

Can one partner dissolve a partnership?

Yes, if it’s an at-will partnership. Then a partner can give notice for dissolution.