Continue the firm on resignation of a partner in two partner firm
ummesh
(Querist) 18 August 2016
This query is : Resolved
Ours is a 30 year old registered partnership firm with two partners having equal share in profits/losses. Now, one of the partner wants to resign and retire with his share. I am afraid this will lead to dissolution of our firm (since there are only two partners in the firm and one will leave). Please suggest me a solution by which I can continue with same firm and with same name.
Ms.Usha Kapoor
(Expert) 19 August 2016
Dear Client,
if the other partner resigns there is no need for dissolution. you can avoid dissolution at the time of formation of partnership business by incorporating in partnership DEED BUY/SELL AGREEMENT clause WHERE YOU BUY THE OUTGOING PARTNERS STAKE/SHARE IN THE PARTNERSHIP BUSINESS AND BECOME OWNER OF HIS SHARE AFTER SETTLING HIS ACCOUNTS. lATER ON YOU CAN RECONSTITUTE THE FIRM WITH A A new Partnership DEED BY INVITING OR ADMITTING G NEW PARTNERS OR PARTNER TO JOIN YOUR PARTNERSHIP FIRM so your business keep going.If such a clause of buy/sell agreement is not there then the only option for you is dissolution and settlement of accounts and reconstitution the firm buy drafting a new partnership Deed and admitting new partners if the business is reaping profits.
ummesh
(Querist) 19 August 2016
Respected Expert,So once the partner retires and thus the firm is dissolved, Can I reconstitute the same firm after dissolution of the firm?
Rajendra K Goyal
(Expert) 19 August 2016
You have the option:
Continue as proprietor with the name and if outgoing partner agree for it.
or
Introduce another partner and retire the outgoing partner.
Devajyoti Barman
(Expert) 19 August 2016
Agree with My Goyal.
Dissolution of partnership firm is no hindrance to continue business as proprietorship firm.
Ms.Usha Kapoor
(Expert) 19 August 2016
Yes! My dear Client, Once it is dissolved you can reconstitute the firm with a new partnership Deed admitting one or more partners in the business.
Guest
(Expert) 19 August 2016
When firm is not yet dissolved, you have not mentioned what are the demands of your partner, where is the question to continue the same firm by use of same name?
In fact, your questions, "Please suggest me a solution by which I can continue with same firm and with same name," and "can I reconstitute the same firm after dissolution of the firm," are quite vague and premature. Prima facie, your questions relate to some academic query, as you have provided only one-sided story with your own intentions.
In the absence of the terms of agreement to be decided mutually by both the partners, you cannot continue with the same firm with the same name.
So, at first both the partners have the need to mutually decide what should the conditions of the dissolution or reconstitution to be included in the dissolution deed. Thereafter both of you should go to some capable local lawyer and discuss at length what settlement both of you have arrived at, including all necessary valuations, to be included in the dissolution deed for division.
Guest
(Expert) 19 August 2016
Dear Ms. Usha,
Hope you would like to remember my words that the querists with academic question start continuing with their supplementary questions, when not able to find complete solution to their academic queries with assumed problem without existence of that.
