What happens to the business when a partnership dissolves?

The correct answer is option 2- The business continues as before.

When a partnership dissolves The business continues as before.

The reconstitution of a partnership firm which takes place on account of admission, retirement or death of a partner. In such a situation while the existing partnership is dissolved, the firm may continue under the same name if the partners so decide. In other words, it results in the dissolution of a partnership but not that of the firm. Dissolution of Partnership changes the existing relationship between partners but the firm may continue its business as before.