Question

Identify which will lead to dissolution of partnership.

• A. When the business of the firm becomes illegal
• B. When a partner becomes insane
• C. When there is change in existing profit-sharing ratio among partners
• D. When a partner persistently commits breach of partnership agreement

Hint:

A change in profit-sharing ratio typically results in reconstitution but may lead to dissolution if partners choose to end the old agreement.

Answer 1

The Correct Option is C

Step 1: Analyze Conditions for Dissolution
A modification to the existing profit-sharing arrangement among partners typically signifies a reconstitution of the partnership. However, if partners mutually agree to dissolve the current firm and establish a new one, this can be interpreted as dissolution.
Alterations in the profit-sharing ratio can necessitate the dissolution of the existing partnership firm.
Conducting an illegal business (A) or violating the partnership agreement (D) are potential grounds for dissolution, though not always absolute.
The insanity of a partner (B) might result in dissolution, contingent upon the terms of the partnership agreement.
Step 2: Final Determination
Based on the provided options, (C) is identified as the correct response, confirming that a change in the profit-sharing ratio triggers dissolution.