Law Legal Studies · Commerce Accountancy

Partnership and Business Law

1,019 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

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.

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

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.