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

Directions: Choose the correct option for the given question:

Consider the following statements: In the absence of an agreement, a partner of a firm has the right to

  1. Claim remuneration for taking part in the management
  2. Take part in the conduct and management of business
  3. Share the profits of the firm equally with other partners
  4. Pledge partnership property as a security for his own private debts Which of the statements given above is/are correct?

  1. (1) and (4)

  2. (2) and (3)

  3. (1) only

  4. (4) only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under the Indian Partnership Act 1932, in the absence of an agreement, a partner has the right to participate in the conduct and management of the business (Statement 2) and share profits equally with other partners (Statement 3). A partner cannot claim remuneration for management (Statement 1) without an agreement, and cannot pledge partnership property for personal debts (Statement 4) - that would require specific authority. Therefore, only statements 2 and 3 are correct.

Multiple choice

A partner's salary and commission is/are

  1. charges against profit.

  2. appropriation out of profits.

  3. charges against assets

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

It is an appropriation out of profits, because it is a distribution out of the net profit and not paid in case of loss.

Multiple choice

Goodwill is not affected by

  1. location

  2. number of partners

  3. quality

  4. efficient management
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is not affected by number of partners, since even if there are more number of partners, they don't make efforts, goodwill is not earned.

Multiple choice

A, B, C and D are equal partners. A, B and D die together in a plane crash. This accident results in

  1. dissolution of partnership

  2. dissolution of firm

  3. both dissolution of partnership and firm

  4. neither dissolution of partnership nor firm
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A partnership requires at least two people to exist. If three out of four partners die, the partnership is dissolved, and since only one person remains, the firm itself cannot continue as a partnership and is also dissolved.

Multiple choice

Partners are collectively known as

  1. partnership

  2. firm

  3. business

  4. agency
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The persons entering into some partnership with each other are known as partners and collectively as firm. Business is an activity which can be carried by sole trader, partners, company, etc. and agency is the relationship where one person authorises other to act on his behalf.

Multiple choice

Which of the following relationships forms partnership?

  1. A money lender sharing a part of profits in addition to interest

  2. An agent getting a share in addition to his commission

  3. Widow of a partner getting annuity from firm

  4. Sharing of profits between two college friends carrying a part-time business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It does not matter whether the business is part-time or full-time. The sharing of profits constitutes an element of partnership. Though all others are getting a part of profits, but are not partners.

Multiple choice

Which of the following is false?

  1. When a partner becomes insolvent, he ceases to be the partner of firm.

  2. A firm automatically dissolves in the absence of contrary contract.

  3. No public notice is required to be given for such act.

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

All of these are true.

Multiple choice

Match the following:

 
List - I List - II
i. Liability for misappropriation by a partner a. Section 26
ii. Liability of a partner for torts b. Section 27
iii. Liability of a partner for holding out c. Section 28
iv. Doctrine of implied authority d. Sections 18 and 19 of a partner

  1. i - c, ii - d, iii - a, iv - b

  2. i - b, ii - a, iii - d, iv - c

  3. i - a, ii - b, iii - c, iv - d

  4. i - b, ii - a, iii - c, iv - d
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

i - b, ii - a, iii - c, iv - d

Multiple choice

Find the correct legal statement from following statements.

  1. Every partner is liable, severally with all the other partners and jointly, for all acts of the firm done while he is a partner.

  2. Every partner is liable, jointly with all the other partners and severally, for all acts of the firm done while he is a partner.

  3. Every partner is liable only for acts done by him as acts of the firm done while he is a partner.

  4. Sleeping partner is not liable for acts done by him as acts of the firm done while he is a partner.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Option (2) is correct: Section 25 of the Partnership Act states that every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.