Question

State the following statement is true:

Dissolution of partnership automatically results in the dissolution of the firm.

Answer 1

This statement is false.

Explanation:

The dissolution of a partnership does not necessarily result in the dissolution of the firm. While the dissolution of the partnership refers to the end of the relationship between the partners, the firm may continue to exist if the partners agree to carry on the business under a different agreement or reconstitute the firm. The firm is only fully dissolved when the business operations are wound up, liabilities are settled, and the remaining assets are distributed, a process which occurs after the dissolution of the partnership.