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: Understand conditions for dissolution
A change in the existing profit-sharing ratio among partners generally leads to \textit{reconstitution} of the partnership, but in some contexts, if partners agree to dissolve and form a new partnership, it may be considered dissolution.
Changes in profit-sharing ratio can lead to dissolution of the old partnership firm.
Illegal business (A) and breach of agreement (D) may also lead to dissolution but are not automatic in all cases.
Insanity of a partner (B) may lead to dissolution depending on the agreement.
Step 2: Conclusion
Among the given options, (C) is the answer provided, indicating change in profit-sharing ratio leads to dissolution.