Question

In which condition a partnership is considered to be dissolved:

Options

• The lunacy of partner

• The business of the firm becomes illegal

• When there is a change in profit sharing ratio

• When all the partners become insolvent

Answer 1

The business of the firm becomes illegal

Explanation:

A partnership is considered dissolved when it is legally impossible for the firm to continue its business, such as when the business becomes illegal. Other events like lunacy of a partner or a change in profit-sharing ratio lead to reconstitution of the partnership, not dissolution. The insolvency of all partners would also result in dissolution, but the primary condition listed here is the illegality of the business.