Which statement best describes the difference between the dissolution of a partnership and the dissolution of a firm?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- The dissolution of a firm ends the existence of the firm, while the dissolution of partnership results in the continuation of the partnership firm.
The dissolution of a firm signifies the termination of the business entity as a whole, while the dissolution of a partnership indicates the ending of the existing partnership relationship between the partners. Dissolution of partnership means the reconstitution of the partnership firm by the way of admission of a new partner, retirement or death of a partner, etc. Dissolution of the firm makes the firm to end the partnership and the business comes to end.