Overview
A partnership is a type of business arrangement where two or more persons concur to split a company's gains and losses. The Indian Partnership Act of 1932 regulates partnerships. The dissolution of partnership between all the partners of a firm is called “dissolution of firm.
Various types of Dissolutions
Dissolution by agreement:
A Firm may be dissolved with the consent of all the partners or according to the contract between the partners. Dissolution by agreement is a sort of partnership dissolution that takes place when all of the partners consent to the dissolution. A conflict between the partners, a change in the partners' personal situations, or a shift in the business environment are just a few causes for this to occur.
Compulsory Closure:
A firm is dissolved by the adjudication of all the partners or of all partners but one s insolvent
A firm is dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on for the partners to carry it on partnership.
Dissolution on happening of contingencies
A company may be dissolved if specific events occur, such as:
1. Expiration of the term: If the firm was established for a specific period of time, it will dissolve when that time has passed.
2. If the company was established to carry out a specific venture, it will dissolve once that mission is complete.
3. Death of a Partner: If one of the partners passes away, the company will dissolve unless the remaining partners agree to carry on.
4. Partner bankruptcy: If one of the partners files for bankruptcy, the company will dissolve unless the remaining partners agree to carry on with operations and take on the insolvent partner's portion of the debts.
Dissolution by notice of partner at will:
The partner who desires to dissolve the partnership must notify the other partners in writing whether they want to do so via notice of partner at will. The date the partnership will be dissolved must be specified in the notice. If the notice doesn't provide a date, the partnership will end on the day that the other partners receive it.
The partners must wind up the partnership's business after it has been dissolved by notice of partner at will. This entails gathering all partnership assets, paying off any partnership debts, and distributing any remaining assets to the partners.
Dissolution by Court:
A partnership may be dissolved by the court if one or more of the partners:
has lost their mental capacity.
has lost the ability to carry out their responsibilities as a partner forever.
has engaged in behaviour that is likely to harm the partnership's ability to conduct business.
has intentionally or repeatedly broken the cooperation agreement.
has given their full partnership interest to a third party.
has consented to the charging or sale of their partnership interest.
has run out of money
has died
Documents required:
Documents may vary for each type of dissolution, however below given are basic documents:
|
S. No. |
Documents |
|
1 |
Dissolution agreement |
|
2 |
Partnership agreement |
|
3 |
PAN and address proof of all partners |
|
4 |
Tax Returns |
|
5 |
Financial documents |
|
6 |
List of creditors |
|
7 |
Consent from creditors |
What is included in this
- Dissolution agreement
- Documents preparations for dissolution
- Filing of application at Registrar of Firms
- 24*7 Mail Support;
FAQ’s
- What is closure of Partnership firm?
The process of dissolving a partnership is called a closure of a partnership business. This may occur for a number of reasons, including the passing of a partner, their retirement, or their failure to reach an agreement over the management of the company.
The partners must wind up the company when a partnership is dissolved. This entails liquidating the company's assets, clearing its debts, and distributing any proceeds or losses to the partners.
- What is Partnership Agreement?
A partnership agreement is an agreement between two or more people who have decided to operate a business jointly. The agreement outlines the guidelines for operating the firm, including how revenues and losses will be allocated, how decisions will be made, and how disagreements will be settled.
3. What is the liability of act of partner done after dissolution ?
All of the partners are nonetheless responsible for the act if it fell within the extent of the partner's authority and the third party was unaware or should have been unaware that the firm had been dissolved. Only the partner who actually committed the conduct is accountable, nevertheless, if it was outside the extent of their authority or if a third party knew or should have known that the partnership had been dissolved.
4. What if all the partner wish to dissolve the partnership?
The partners may dissolve their partnership mutually through a dissolution agreement but post dissolution, partners may continue to be responsible for the partnership's debts. When the partnership's assets have been sold, its debts have been settled, and its earnings or losses have been allocated to the partners, the winding-up period usually comes to a conclusion.
5. When court gives order of dissolution?
A partnership may be dissolved by the court if one or more of the partners:
has lost their mental capacity.
has lost the ability to carry out their responsibilities as a partner forever.
has engaged in behaviour that is likely to harm the partnership's ability to conduct business.
has intentionally or repeatedly broken the cooperation agreement.
has given their full partnership interest to a third party.
has consented to the charging or sale of their partnership interest.
has run out of money