Law Legal Studies · Commerce Accountancy

Partnership and Business Law

1,007 Questions

Test your knowledge of partnership regulations and business law with these practice questions. The topics include the rights of minor partners, firm dissolution, retirement rules, and public notices. This material is crucial for law exams and legal studies.

Rights of minor partnersPublic notice requirementsFirm dissolution rulesPartner retirementHolding out partner principlePartnership deed provisions

Partnership and Business Law Questions

Multiple choice

In the absence of custom of trade to the contrary, the implied authority of a partner does not empower him to

(a) submit a dispute relating to the business of the firm to arbitration (b) compromise or relinquish any claim or portion of a claim by the firm (c) acquire immovable property on behalf of the firm

  1. Only (a) and (b)

  2. Only (b) and (c)

  3. Only (a) and (c)

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to

(a) submit a dispute relating to the business of the firm to arbitration

(b) open a bank account on behalf of the firm in his own name

(c) compromise or relinquish any claim or portion of a claim by the firm

(d) withdraw a suit or proceeding filed on behalf of the firm

(e) admit any liability in a suit or proceeding against the firm

(f) acquire immovable property on behalf of the firm

(g) transfer immovable property belonging to the firm

(h) enter into partnership on behalf of the firm

Multiple choice

Which of the following is not an essential feature of a mandate?

  1. It is given on a simple paper.

  2. It does not require registration with any government authority.

  3. In joint accounts and in partnership, it should be signed by all account holders/all partners.

  4. It should be properly stamped.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Mandate is an unstamped letter that is signed by a customer, authorising him to operate the account on his behalf. Thus, option 4 is the correct answer. 

Multiple choice

Where a minor is admitted for benefit in a partnership firm and he attains majority and decides to join the firm as partner, his liability begins from the

  1. date of his majority

  2. date of his decision to join the firm

  3. date of information to him that he was admitted for benefits

  4. date when he was admitted for benefits
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

At any time within six months of his attaining majority, or of his obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, such person may give public notice that he has elected to become or that he has elected not to become a partner in the firm, and such notice shall determine his position regarding the firm.

Multiple choice

Operation in a current account in the name a firm can be allowed in which of the following circumstances?

  1. If one of the partners has become insolvent.

  2. If one of the partners has given instructions to stop payment while others agree for operations.

  3. If one of the partners has died and the remaining partners want the operations for winding up the business.

  4. If number of partners has reached 21 due to two minors that have decided to become partners after attaining majority.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If one of the partners has died and the remaining partners want the operations for winding up the business.

Multiple choice

B requested the bank for garnishee order for A, who has a partnership account. What all can be attached in that case?

  1. The order will attach accounts of all the partners.

  2. The order will not attach any account.

  3. The order will attach personal account of the partner A.

  4. Any of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In case of partnership accounts, the personal accounts of the partners can be attached in addition to the account of the firm. But, reverse is not possible. 

Multiple choice

Which of the following actions can be considered an action of a partner that would bind other partners?

  1. Acknowledgement of debt already obtained by the firm

  2. Opening a bank account of the firm, in his own name

  3. Giving a mandate to allow another person to operate the account

  4. To sell the immovable property relating to the firm
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Acknowledgement of debt already obtained by the firm can be considered an action of a partner that would bind other partners under Limitation Act, 1963.

Multiple choice

In a joint account in the name of X and Y, a request is received to substitute the name of X by Z. Later on, another request comes from Y and Z either to replace the name of Y with A or add the name of A. Which of the following is not correct?

  1. Request of X and Y can be accepted.

  2. Request of Y and Z to replace the name of Y with that of A can be accepted.

  3. Request of Y and Z to add the name of A can be accepted.

  4. While changing the name, it has to be ensured that at least one of the original account holders should continue in the account.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

At least one of the original account holders needs to stay. Both can't be replaced.

Multiple choice

Which of the following is not a correct statement in the context of registration of a partnership firm?

  1. Provisions for registration of a firm are u/s 58 of Indian Partnership Act.

  2. Registration of a firm is optional and not compulsory.

  3. If a firm is not registered, neither it can file suit in its own name, nor anyone else can file suit on this firm.

  4. If a firm is registered, it can file suit in its own name and a suit can be filed on the firm by others, whether registered or unregistered.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The registration of a partnership firm is voluntary and not compulsory as the word used under Section 58 which deals with registration of a firm is “may’’ and not “shall.”

Multiple choice

A firm’s bank account should be opened in the name of the firm only as Section ___ of Indian partnership Act restricts opening a bank account on behalf of a firm _____.

  1. 19, by one partner

  2. 19(1), by all partners

  3. 19 (2), in its own name

  4. 19(2), in one partner's name
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Section 19(2) of Indian Partnership Act: In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to (a) submit a dispute relating to the business of the firm to arbitration (b) open a banking account on behalf of the firm in his own name (c) compromise or relinquish any claim or portion of a claim by the firm (d) withdraw a suit or proceeding filed on behalf of the firm (e) admit any liability in a suit or proceeding against the firm (f) acquire immovable property on behalf of the firm (g) transfer immovable property belonging to the firm (h) enter into partnership on behalf of the firm

Multiple choice

Fiduciary relationship is a relationship based on

  1. contract

  2. blood relationship

  3. money

  4. <font size="2">t</font>rust
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. A fiduciary duty is the highest standard of care at either equity or law.

Multiple choice

In a limited liability partnership, the rights and obligations of the partners are as per

  1. Certificate of Incorporation

  2. Schedule II to the LLP Act

  3. Agreement between Partners Act

  4. Agreement between partners and if there is no such agreement, then as per Schedule I to the LLP Act
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The mutual rights and duties of the partners and the mutual rights and duties of the LLP and its partners shall be determined on the basis of LLP agreement between the partners, or between the limited liability partnership and its partners. If there is no agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the LLP and its partners shall be determined by the provisions relating to that matter as set out in the First Schedule.

Multiple choice

Which of these features of limited liability partnership is not correct as per LLP Act 2008?

  1. LLP is a separate legal entity.

  2. LLP is separate from its partners.

  3. LLP is taxed as a partnership.

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Some of the key features of LLPs are: They are a separate legal entity from their members. They have the benefit of limited liability for their members. They are taxed as a partnership. Thus, all the mentioned are the features of limited liability partnership. Thus, option 4 is the correct answer.

Multiple choice

A partnership is a contract with all of the following features, except that the

  1. contract can be oral contract also

  2. contract is to carry any type of business, lawful or otherwise

  3. business is to be carried to make profits and share profits

  4. mutual relationship between partners is of agency
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under partnership contract, any business should be in accordance to the laws. The owners are all personally liable for any legal actions and debts the company may face, unless otherwise provided by law or in the agreement. 

Multiple choice

Which of the following is incorrect in the context of partnership firms?

  1. Partnership is registered with Registrar of Firms and not the partnership deeds.

  2. Registration of partnership firms is not compulsory.

  3. Registered firms have certain advantages over the unregistered firms.

  4. Non-registration of the firm adversely affects the capacity of the partners to carry on the business.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Two conditions are necessary to enable a partner to sue his co-partners or the- firm. First, the firm should be registered and second, the name of the partner suing must figure in registration. The scope of the sub-section was examined by the Bombay High Court in S. H. Patel v. Husseinbhai Mohd, a case where the action was between two former partners to enforce an agreement restraining the outgoing partner from carrying on in some area of any business similar to that of the firm and the court had to examine whether such suit was maintainable the firm being unregistered.