What is Dissolution of Firm?
Dissolution of a Firm is the solvency of the firm, i.e., dissolving or going into solution. Dissolution of a firm is the termination of an organised body, especially a formal dismissal. Dissolution of a firm means discontinuing business, and the business relationship among all the partner’s end. According to Section 39 of the Indian Partnership Act, 1932, “Dissolution of the firm means dissolution of partnership among all the partners in the firm.”
In Dissolution of a Firm, all the assets are realised and the liabilities are paid. The balanced realised amount is distributed among all the partners. A firm is dissolved either by the Court Order or without Court Order. A firm is dissolved when all the partners agree to dissolve or on the completion of the venture. The court can give an order to dissolve the firm when a partner becomes an unsound mind person or the court finds the dissolution of the firm justified.
Difference between Dissolution of Firm and Dissolution of Partnership
A Partnership is an association of two or more people to conduct business. A Partnership is a relation between persons who agreed to share the profits of a business carried on by all or any of them acting for all. Partners are someone who is associated with another in a common activity or interest, like a business or partnership law member. Partners are the persons who have entered into a partnership individually. A firm is a business partnership; the name under which it trades. Dissolution of a firm or partnership is disintegration or going into solution. Dissolution is to break the continuity of, to separate, to repel.