Future Business Leaders of America (FBLA) Business Law Practice Exam

What does it mean when a partner is no longer associated with a firm?

1. Severance

2. Dissolution

3. Termination

4. Resignation

The correct answer is: Dissolution

When a partner is no longer associated with a firm, the term used to describe this situation is dissolution. In the context of business partnerships, dissolution refers to the formal process of ending a partnership, which can occur for various reasons such as mutual agreement, expiration of the partnership term, or the departure of a partner. Dissolution involves more than just the physical departure of a partner; it includes the legal implications and processes that must be followed to appropriately close the business affairs of the partnership. This might involve settling accounts, distributing assets, and addressing any liabilities or legal obligations left behind. The term signifies a broader context of ceasing the partnership's existence as a legal entity, rather than simply the exit of an individual partner. While severance, termination, and resignation might imply a withdrawal from activities or roles, they do not encapsulate the full legal and procedural implications associated with dissolving a partnership. Each of those terms could refer to varying degrees of separation but lacks the specificity that "dissolution" conveys regarding the end of the partnership's operations and responsibilities.