Dissolve a Partnership Firm

Dissolution of a Partnership firm

Partnership firm is the business entity that is formed with a sole purpose of profit from business. Two or more parties come together with a formal agreement (known as Partnership Deed) to own and manage the business. Once the purpose is met or after the partners decide to put in end to the partnership it needs to be dissolved and the partnership comes to an end. On dissolution of the firm, the business of the firm ceases to exist since its affairs are would up by selling the assets and by paying the liabilities and discharging the claims of the partners. The dissolution of partnership among all partners of a firm is called dissolution of partnership firm. This is usually done through a dissolution agreement between the partners.

Methods of dissolution of a partnership firm in India

Dissolution with intervention of the court
When a dissolution is initiated by one partner by suing the other then the courts get involved. But a court can dissolve the firm only if it is registered with the registrar of firms. Hence an unregistered partnership firm can’t be dissolved by the court. The court may intervene and help in the dissolution in situations where one partner becomes incapable to carry out his duties due to incapability, or unsoundness of mind, if a partner is guilty of misconduct that can harm the business, repeated breach of the partnership agreement by a partner. In these situations the court may get involved and help the partnership get dissolved legally.
Dissolution without courts intervention
Usually, partnership firms are dissolved through dissolution agreements between the concerned partners. All the partners come together and sign an agreement confirming such a dissolution and mutually settling all the pending liabilities and accounts among them. Hence there is no need of any third party intervention. This may occur for various reasons like insolvency of partner/partners, or Unlawful business carried on in the name of the partnership firm by one of the partner. In case the term of the decided partnership expires or the task for which the partnership was created is finished, Death of one of the partners and resignation of a partner. It can also be dissolved by a notice of dissolution sent by one partner in written to all other partners.

Documents Required for winding up of partnership firm

Address Proof of firm
If the registered office place is rented, rent agreement and one utility bill (electricity bill, water bill, property tax bill, gas receipt etc.) have to be submitted. Also, NOC from landlord will be submitted.
PAN Card
All partners are required to submit their and the firms PAN number as identity proof.
Legal Liabilities
A statement regarding pending litigations, if any involving the partnership firm.
Address Proof of firm
If the registered office place is rented, rent agreement and one utility bill (electricity bill, water bill, property tax bill, gas receipt etc.) have to be submitted. Also, NOC from landlord will be submitted.
List of secured creditors
Accounting Information
The financial statement of the partnership firm
Original partnership deed and all its modified versions

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Dissolve Partnership in 3 Easy Steps

  • Fill in our questionnaires that take less than 10 minutes
  • Provide basic details & documents required for registration
  • Make payment through secured payment gateways
  • Assigned Relationship Manager
  • Drafting of dissolution deed
  • Drafting of affidavit & indemnity bond
  • Preparation of other necessary documents
  • Filing of Strike-off application with MCA

All it takes is 20 working days*

*Subject to Government Processing Time

Process for dissolution of Partnership Firm

  • Discussion and collection of basic Information
  • Provide required documents
  • Review of the details and documents furnished
  • Drafting of the dissolution agreement
  • Drafting of the affidavit, indemnity bond and other documents
  • Provide duly executed affidavit & indemnity bond
  • Provide signed documents after review
  • Execution of dissolution agreement
Explore dissolution of partnership firm

Frequently Asked Questions

What is the difference between the dissolution date and the winding up date?
When the partnership ceases to exist, that date is known as the dissolution date . after this there is no business relationship between the partners. After which the partners will complete any unfinished work, settle any liabilities, realize any partnership assets and otherwise wind up the partnership. The winding update is the date when the winding-up of the partnership is completed.
What does the dissolution deed of a partnership firm cover?
The dissolution deed would cover :
1)The date on which the partnership will cease trading and be dissolved and how it will be wound up.
2)what the partners can and cannot do from the date of dissolution until the partnership is wound up.
3)the return of documents, the realization of the partnership’s assets and the termination of contracts and other arrangements for the discharge of the partnership’s liabilities.
4)the preparation and approval of the partnership’s final set of accounts.
5)the distribution of any partnership monies after the liabilities have been discharged.
6)the retention of records
7)the notification of the dissolution
How are accounts settled for winding up of the partnership ?
First, the Losses of the firm will be paid out. The Assets of the firm and the capital contributed by the partners to set-off losses of the firm will be applied :
Third party debts will be paid first. Next, loan amount taken by a firm from any partner will be repaid to that partner
Capital contributed by each partner will be repaid to him in the capital contribution ratio. Balance amount will be shared among the partners in their profit sharing ratios. Upon realization, all assets will be sold off in the market, and the cash realizing out of such a sale will be used for paying the liabilities. Assets or liabilities may also be taken over by the partner(s) for which the respective partner capital accounts will be adjusted by such amount.
Which are the contingencies due or which a partnership needs to be dissolved ?
1) If the partnership was created for a fixed term, then on the expiration of the term the partnership will be dissolved.
2) If the partnership has been created for a particular task or objective, then after the completion of that task or fulfillment of that objective the partnership would come to an end.
3)If one of the partners dies than it’s prima facie that the partnership would come to an end unless it is provided otherwise in the agreement either express or implied from the conduct of the partners.
What are the Liabilities of partners after dissolution
The partners are liable to the third parties for any act done before the dissolution. The liability of a partner finishes when all the event are finished that has been taken up before the dissolution of the firm until public notice is given of the dissolution.
What are the rights of partners post dissolution ?
Every partner is entitled to equal rights or according to the contract. All the partners are entitled to the property of the firm applied in payment of the debts and liabilities of the firm and to have the surplus distributed among the partners or their representatives according to their rights. These rights are given when winding up of the firm is taking place
What is the difference between dissolution of partnership firm and dissolution of partnership ?
Dissolution of a partnership occurs when a partner ceases to be associated with the business, whereas dissolution of a firm is the winding up the business.

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