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

An un-registered partnership firm

(a) can file suit for enforcement of contracts entered into by it with third party (b) cannot file suit on its own partners (c) other parties cannot file suit on unregistered firm

  1. Only (b) and (c)

  2. Only (a) and (c)

  3. Only (a) and (b)

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

An unregistered firm cannot sue any third party for the enforcement of any right arising from contract. There are two requirements of the right to sue namely, the firm should be a registered one and the person suing should appear as a partner in the registration. Also, other parties can file suit on an unregistered firm.

Multiple choice

Which of the following statements is incorrect?

  1. A partnership firm can be registered u/s 58 of Indian Partnership Act.

  2. Accompany is a legal person created through incorporation.

  3. Certificate of Commencement of business is conclusive evidence of existence of a company.

  4. Where two or more persons agree to share profit from business, it is called a partnership.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Certificate of Incorporation is conclusive evidence of coming into existence of the company.

Multiple choice

Registration of a partnership firm under provisions of Indian Partnership Act, 1932 can be with the

  1. registrar of firms of the area in which the business of the firms is conducted

  2. registrar of firms of the area in which the registered office of the firm is located

  3. registrar of companies of the area in which the business of the firm is conducted

  4. registrar of companies of the area in which the registered office of the firm is located
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The partnership firm to be registered under Indian Partnership Act, 1932 should be under the notice of registrar of firms of the area in which the business of the firms is conducted.

Multiple choice

For actions of a partner in a limited liability partnership

  1. all the partners become automatically liable

  2. the LLP does become liable

  3. other partners do not becomes liable for one

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

No partner would be liable on account of the independent or unauthorised actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct.

Multiple choice

Implied authority of the partner can be used by him in which of the following circumstances?

  1. Withdraw a suit pending in a court

  2. Acquire a transfer of immovable property on behalf of the firm

  3. Open bank account on behalf of the firm in his own name

  4. Appoint agent with the consent of the other partners
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Implied authority, also known as “usual authority”, is the authority of an agent acting on behalf of another person or entity. The person acting with implied authority does what is reasonably necessary in order to effectively perform his duties. The acts undertaken surrounding the use of implied authority depend on the circumstances and the case. Thus, in case of implied authority of the partner, one can appoint agent with the consent of the other partners. 

Multiple choice

Agent can be appointed by _________.

  1. Express Appointment

  2. Implication of Law

  3. Ratification by Principal

  4. Any of the above three modes
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Agent can be appointed by express appointment, estoppel, implied appointment, ratification by principal and necessity, etc. Thus, all the given options are correct.

Multiple choice

Which among the following are some of the main features of a 'Limited Liability Partnership'?

  1. The partners have the right to manage the business directly.
  2. Minimum 2 partners are required and there is no limit on maximum.
  3. It encourages smaller business entities to undertake larger ventures.

  1. 1 and 2

  2. 1 and 3

  3. 2 and 3

  4. 1, 2 and 3
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Limited Liability Partnership is a partnership in which some or all partners (depending on the jurisdiction) have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. In an LLP, some partners have a form of limited liability similar to that of the shareholders of a corporation. Some of its major benefits are:

1. The partners have the right to manage the business directly.
2. Minimum of 2 partners and no limit on maximum.
3. Encourages smaller business entities to undertake larger ventures.
Hence, all the three statements are correct.

Multiple choice

Mr. A (practicing CA) is a partner in XYZ Associates as well as ABC Associates. XYZ Associates retired under rotation as per section 139 (2). The company decides to appoint ABC Associates as the next auditor. Can the company do so?

  1. Yes

  2. No

  3. Yes but Mr. A can not sign the audit report

  4. Yes and Mr. A can sign the audit report

  5. Company can appoint other partners in ABC Associates except Mr. A
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As per section 139 (2) of Companies Act,2013, proposed audit firm having partner who is also a partner in the retiring audit frim is ineligible to act as the auditor of the company

Multiple choice

Within how many months of attaining majority, a minor admitted into the benefits of a partnership firm must decide whether he wants to become a partner in the firm?

  1. Two

  2. Three

  3. Six

  4. Twelve
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Section 30(5) of the Indian Partnership Act, 1932 requires a minor (admitted to partnership benefits) to decide within six months of attaining majority whether to become a partner. If no decision is communicated within this period, it's presumed that the minor has chosen not to become a partner.

Multiple choice

Generally, an introduction of a new partner in a partnership firm would require the consent of

  1. the majority of the partners

  2. all the partners

  3. the majority of partners barring the dormant partners

  4. the partners having majority share in the firm
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Section 31 of the Indian Partnership Act, 1932 requires the consent of all existing partners when introducing a new partner. Since partnership is based on mutual agency and trust, the admission fundamentally changes each partner's relationship and liability, requiring unanimous agreement rather than mere majority approval.