A, B and C are partners in a firm. If D is admitted as a new partner, what will be its affect?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Old partnership is reconstituted.
If M is admitted as a new partner, Old partnership would be reconstituted.
When a new partner (D) is admitted into a partnership, the existing partnership (between A, B & C) is reconstituted because the agreement between the existing partners changes. However, the firm itself does not necessarily dissolve unless the partners decide to dissolve it. The admission of a new partner leads to a new agreement among all partners (old + new), but the business can continue under the same name and entity.