In partnership, the partnership deed has a significant
place. On the basis of it, the accounts of partnership are in the Partnership Deed, the matter may be finally disposed finalised and settled. But if there is no mention of settlement ship Act of on the basis of Sees. 48, 49 and 50 of the Indian Partner
These provisions are as follows:
(1) The losses sustained by the firm, including the
loss of capital, shall be made good out of the firm’s profits, thereafter shall be met out of the capital, and finally, if so needed shall be made good by the partners individual in the same proportion in which they were the profit-sharers.
(2) The firm’s property, including the money for meeting the deficit of capital, as given by the partners, could be used in the following order:
1.Firstly, in the payment of loans granted by other parties to the firm;
2.Secondly, for making payment of the money which the partners have advanced to the firm besides the capital, for paying off the debts;
3.Thirdly, for paying off the amount of the partners’ capital; and
4.Lastly, for distributing among the partners in their profit sharing ratio.
In case of meeting the losses, personal assets of thepartners shall be firstly used for the re-payment of their personal loans or dues, and only thereafter the remaining balance could be used for paying off the loans of the firm. If the assets of the partnership firm are insufficient for meeting the liabilities of the firm, the creditors of the firm may also realise their debts from the personal property of the partners, besides the assets of the firm. But in such a case, before the firm’s creditors, personal creditors of the partners must be paid out of their personal property.
Treatment of Goodwill at the Time of Dissolution
At the time of dissolution, the goodwill could either be sold separately or along with the other assets of the firm. Any partner may also purchase the goodwill himself and is free to run the business in the name of the firm. The purchaser of goodwill may impose suitable restriction on any partner on running the same kind of business within the mentioned limits and for a definite period: Not with standing the provisions of Sec. 27 of Indian Contract Act, such contracts are valid probusiness may also be taken up at the time of firm’s dissolution vided the restriction is justified. Such contract restricting the or in anticipation when the goodwill has not been sold off.
Dissolution of Partnership and of a Firm
Meaning of Dissolution of Firm: When the total
partnership is dissolved a among all the partners of a firm, it is known as the dissolution of a firm. Thus, in case of the firm’s dissolution, mutual inter-relationships of all the partners are broken with each other and they don’t work in the form of partners.
Meaning of Dissolution of Partnership: When the
relationship of any partner is broken against the other partners, it is conceived that the partnership has been dissolved.
In such a situation, the remaining partners again form the firm and may carry on the trade of the firm. It is known as the end of the partnership, and not of the firm.
It is worth mention here that all the partners together collectively form the firm. Hence, if the firm faces disorganisation, there has also to be the compulsory disorganisation of the partners, but when there is the dissolution of the partnership, then it is not compulsory that the firm must also be dissolved.