Question

Sub: Advanced Federal Taxation

Which way of exiting the partnership do you feel is best for the partnership? Why?

Answer 1

A Partnership is an agreement among different business persons, where they come together in order to rub business and share profits.

Partnership deed must state all the terms and conditions to run the partnership, share of profits and procedure to exit from a partnership.

There are various reasons why a partner exit from a partnership. Some of them are disability, bankruptcy, death, resignation or voluntary retirement.

The best way to exit from partnership is getting voluntary resignation from the partnership firm.

An owner may leave the organization voluntarily. The reason can be unfulfilled needs, change of lifestyle, want of working at higher position with new different firm. The partnership agreement should contain a proper procedure for distribution of partnership interests after resignation of a partner.

The main benefit of the resignation is that the exiting partner may get the benefits of exit in form of capital return, his share in profits, and other benefits of his share. On the contrary, if a partner becomes insolvent, he will not get benefits of his share in the partnership.

So, Voluntary Resignation from partnership is the best for partnership.