Which of the following combination of statements are true about dissolution?
(A) A firm is compulsorily dissolved when a partner decide to retire.
(B) Dissolution of a partnership is different from dissolution of a firm.
(C) A partnership is dissolved when there is a death of a partner.
(D) Dissolution of a firm necessarily involves dissolution of partnership.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (B), (C) and (D) only
Dissolution of a partnership only ends the existing agreement among the partners, and the firm may carry on; dissolution of the firm ends the relationship among all the partners and closes the business.
(A) A firm is compulsorily dissolved when a partner decide to retire. Incorrect. Retirement reconstitutes the partnership; the remaining partners carry on the firm. Compulsory dissolution happens only on insolvency of all (or all but one) partners or when the business becomes unlawful.
(B) Dissolution of a partnership is different from dissolution of a firm. Correct. A partnership is dissolved whenever the agreement changes, but the firm is dissolved only when the relationship among all the partners ends.
(C) A partnership is dissolved when there is a death of a partner. Correct. Death ends the existing agreement; the remaining partners may continue the firm under a new one.
(D) Dissolution of a firm necessarily involves dissolution of partnership. Correct. When the firm itself closes, the relationship among all the partners ends, so the partnership is dissolved along with it; the reverse is not true.
NCERT (2026-27 edition):
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