In all the four forms of partnership stated under, the partners have the right to terminate the contract by giving due notice to the other partners. A partnership is also terminated on the death of a partner. However, if the descendants of the deceased wish to continue as the partner in the business, they can renew the contract.

Dissolution of Partnership Firm

Dissolution of a partnership firm is different from the dissolution of a partnership. When one partner dies, retires, adjudged bankrupt but the remaining partners decide to carry on the business of the firm, the partnership ends but the firm is not dissolved. Dissolution of a firm takes place when all the partners cease to carry on the business and the business of the firm is closed. The assets are realized to pay the liabilities of the firm.

Dissolution of Partnership

The partnership may be dissolved without dissolving the firm. For example, there are four partners in a firm. If one of them dies, retires or adjudged insolvent, the partnership would come to an end. But it the partner have agreed that the death, insolvency, retirement if a partner would not dissolve the firm then on the happening of any such event the firm can be reconstituted.  It can carry on its business under the same name. We, therefore, conclude by saying that the dissolution of the partnership may or may not comprise the disbanding of the firm. But the dissolution of the firm includes dissolution of the partnership.

Dissolution of a firm

Dissolution of a firm means the end of the contractual relationship between all the partners. If there is disbanding of partnership among all the partners of the firm, it is a case of ending of a firm. Here all the members cease to carry on the business. One close of the business, the assets or liabilities is settled as per agreement.

Mode of Dissolution of a firm

According to the partnership act, the breakup or dissolution of the firm can take palace in various ways. They are placed under three heads.

1.      Dissolution by agreement

2.      Compulsory Dissolution

3.      Dissolution by the Court

Dissolution by Agreement

A firm may be close with the approval of all the partners or in agreement with the contract already made between the partners.

Compulsory Dissolution

The main grounds of compulsory dissolution of a firm are as under:

Insolvency: A firm is dissolved by the insolvency of all the partners or of all the partners but one as insolvent.

Business happening unlawful: the firm is dissolved by the occurrence of an affair which makes the business of the firm illegal.

Contingent Dissolution: subject to a contract between the partners, a firm is dissolved.

Expiry of the term: On the expiry of the term for which it was constituted.

Completion of Partner venture: On the completion of a particular venture for which it was formed.

Death of a partner by the death of a partner

Insolvent:  By the adjudication of a partner as an insolvent.

Dissolution by the Court

If a partner files a suit in the court, it may dissolve a firm on any of the following grounds:

1.      A partner has become of unsound mind.

2.      A partner permanently becoming incapable of performing his duties

3.      A partner found guilty of misconduct in the affairs of business.

4.      A partner willfully or persistently commits a breach of agreement in matters relating to business.

5.      A partner without the consent of other partners has transferred hole of interest to the third party.

6.      Where the business of the firm cannot be carried except at a loss

7.      On any other grounds which the firm finds it just and equitable.