Describe the rights and liabilities of partners on dissolution of a firm.

Rights and Liabilities of Partners on Dissolution of a Firm

1. Rights of Partners:

• Right to Share Profits and Losses: Partners have the right to share in the profits and losses of the firm according to their agreed-upon share.
• Right to Surplus Assets: After paying off the firm's debts and liabilities, partners are entitled to their share of any surplus assets remaining.
• Right to Dissolve the Firm: Partners have the right to dissolve the firm by mutual agreement or in accordance with the terms of the partnership agreement or the law.
• Right to Carry on Business: Until the affairs of the firm are completely wound up, partners have the right to carry on the business of the firm to the extent necessary for its orderly dissolution.
• Right to Account: Partners are entitled to a full and accurate account of the firm's transactions during the dissolution process.

2. Liabilities of Partners:

• Liability for Debts and Obligations: Partners are personally liable for the firm's debts and obligations incurred before or during the dissolution process.
• Liability to Third Parties: Partners are jointly and severally liable to third parties for the firm's debts and obligations.
• Liability to Contribute: If the assets of the firm are insufficient to meet its liabilities, partners may be required to contribute additional funds to satisfy the firm's debts.
• Liability for Misapplication of Property: Partners are personally liable for any misapplication of property belonging to the firm that occurs during the dissolution process.

Conclusion

In conclusion, on dissolution of a firm, partners have certain rights and liabilities. Partners have the right to share in the profits and surplus assets of the firm, the right to dissolve the firm, the right to carry on business for the purpose of winding up its affairs, and the right to a full account of the firm's transactions. However, partners are also personally liable for the firm's debts and obligations, jointly and severally liable to third parties, and may be required to contribute additional funds if the firm's assets are insufficient to meet its liabilities. Understanding these rights and liabilities is essential for partners involved in the dissolution of a firm.