Multiple choice

True test of partnership is

  1. sharing of profits

  2. sharing of profit and losses

  3. mutual agency

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The true test of partnership is mutual agency, not merely sharing of profits or losses. According to Section 6 of the Indian Partnership Act, 1932, partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The essential element is mutual agency - each partner is both an agent and principal of the other partners. Profit sharing is only prima facie evidence, not conclusive proof of partnership.

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