Dissolution / Closure of Partnership Firm
Partnership firms are governed by provisions of the
Partnership Act, 1932. Dissolving a partnership firm is different from
dissolving a partnership. In the former case, the partnership business is
discontinued under the name of said partnership firm, all liabilities are
finally settled by selling off assets or transferring them to a particular
partner, and settling all accounts existed with the partnership firm. Any
profit/ loss is transferred as per the terms of the partnership deed. Whereas, in
the case of dissolving a partnership, the existing partnership is dissolved by mutual
consent or on happening of a certain event, but the firm can continue to remain
in existence, if remaining partners enter into a new partnership agreement.
Dissolution of Partnership firm depends on various
factors and can typically be dissolved in any of the following manner in
pursuance of terms of Partnership or otherwise:-
Ø
By
mutual consent of the partners
Ø
By
serving notice of dissolution by any one of the partners, where partnership is
at will
Ø
Compulsory
dissolution where;
o
All
the partners or all partners but one are declared insolvent
o
The
firm is carrying on unlawful activities including dealing in drugs or other
illegal products or doing business with alien countries or enemy countries
causing harm to the interest of India
Ø
Dissolution
upon happening of one or more pre-defined future events viz.
o
Expiry
of fixed term, where partnership was formed for a fixed term
o
Completion
of task, where partnership was formed to fulfil certain task or objective
o
On
death of all the partners or all partners but one and partnership deed doesn’t
provide for entry of inheritor/s of deceased as partner/s
Ø
In
case of a Registered Partnership Firm, by court, where any of the partners
become mentally unstable or violates the terms of Partnership Deed and
remaining partners approaches court for dissolution of Partnership Firm
It is to be noted that until a public notice of dissolution is given, partners remain liable for any act done by any of the partners which would have been an act of the firm, if such act was done before resolution. Further, if a partner has been declared insolvent or has retired from the firm, he will not be liable for any acts after his insolvency or retirement. The legal heirs of any deceased partner are also not liable for any acts done by other partners after the partner has deceased. It is also to be noted that while making income tax assessment of the firm the Assessing Officer assess the income of the Partnership Firm as if no such dissolution or discontinuation has taken place and all the partners of the erstwhile partnership firm, jointly and severally become liable to discharge tax liability of the erstwhile firm .
At FastCorp, we can help you dissolve a partnership firm by drafting a Dissolution Deed in compliance with law and getting that registered with Registrar of Partnership. Further, we can help you surrender all the business registrations, file final returns, secure no-objection wherever applicable.