Which of the following statements about the dissolution of a partnership firm is incorrect?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- A firm is compulsorily dissolved when a partner decides to retire.
A firm is not dissolved on the retirement of a partner. It is reconstituted.
Compulsory Dissolution: A firm is dissolved compulsorily in the following cases:
(a) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;
(b) when the business of the firm becomes illegal; or
(c) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.