A, B and C are partners in a firm. If D is admitted as a new partner then:

When a new partner is admitted to an existing partnership, the old partnership is reconstituted, not dissolved.

Understanding the distinction:

Partnership vs Firm:

• Partnership refers to the relationship/agreement between partners
• Firm refers to the business entity itself

What happens on admission of a new partner:

The old partnership agreement between A, B, and C comes to an end because it was specific to those three partners only. A new partnership agreement is formed between A, B, C, and D with revised terms (profit-sharing ratio, capital contribution, etc.).

However, the firm continues to exist and operate. The business doesn't close down - it simply has a new composition of partners.

This is called Reconstitution of Partnership.

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Reconstitution occurs in these situations:

• Admission of a new partner
• Retirement of an existing partner
• Death of a partner
• Change in profit-sharing ratio

In all these cases, the partnership is reconstituted while the firm continues.

Dissolution of Firm is different - it means the firm itself closes down and the business is wound up. This happens when all partners decide to close the business permanently.

Therefore, when D is admitted, only the partnership relationship changes (reconstitutes), not the firm itself.