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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 organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

Which of these statements is true in respect of a Joint Hindu Family business?

  1. Joint Hindu Family firm cannot have more than $10$ members

  2. Joint Hindu Family has a perpetual existence

  3. Liability of Manager is limited

  4. Consent of all the members is necessary to admit a new member
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The firm enjoys continuity of operations as its existence is not subject to the death or insolvency of a co-parcener or even of the Karta himself. Thus, it has a perpetual life like the public limited company.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

Head of HUF is known as ______.

  1. karta

  2. coparceners

  3. manager

  4. head
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Joint hindu family business is regulated by the Hindu succession act. According to it the business is owned and managed by the karta, the head of the family and  the members of the family are its co parceners. Hence, the head of the family business is  called as karta.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

When partnership is between two HUF than ____________.

  1. members of both the HUF are taken in account for the calculation of maximum number of person who can form a partnership firm including minors

  2. members of both the HUF are taken in account for the calculation of maximum number of person who can form a partnership firm excluding minors

  3. there can not be a partnership between two HUF

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

When two HUFs enter into a partnership, the members of the HUFs are considered for the maximum number of partners, but minors are excluded from this count as they cannot be full partners in a firm.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

Identify which statement is true and which is false?
1. Any person can become member of HUF.
2. In a HUF business, in the event of death of any of the co-parcener, his wife can claim share of profit.
3. In a HUF business, the liability of the karta is Unlimited.
Select the correct answer from the options given below.

  1. 2 and 3

  2. 1 and 3

  3. 3 and 2

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

The statement fore mentioned are discussed below:

1. False. As per the Hindu Law all persons lineally descended from a common ancestor are members of a HUF.
2. True. In a HUF business in the event of death of any of the co-parcener , his wife can claim share of profit.
3. True. In a HUF busines the liability of the karta is unlimited.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

A HUF cannot enter into partnership agreement with others.

  1. Partly false

  2. False

  3. Partly true

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

An HUF can enter into a partnership agreement with other individuals or other HUFs, provided the Karta acts on behalf of the family.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

Every partner is personally liable for the debts of the firm; in a joint family business only __________ is personally liable.

  1. Male member

  2. Karta

  3. Major male member

  4. Minor male member
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Hindu Joint family business are the type of business which are run by the members of a joint family under Hindu Succession Act, 1956 to achieve common goals. 

In Hindu Joint family business, Karta is the head of the family and manages everything in the business. Karta has the most power in a Hindu family business.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

In a HUF business, in the event of death of any of the co-parcener, his wife can claim share of profit.

  1. False

  2. True

  3. Partly true

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

In a HUF business, in the event of death of any of the coparcener, his wife can claim share of profit-this is  a true statement. A Hindu Undivided Family is an extended family arrangement prevalent among Hindus of the Indian subcontinent. It came into existence as per Hindu Inheritance Laws of India.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

In a HUF business, the liability of the karta is _______________.

  1. Limited to the extent of share of co-parceners

  2. Limited to the extent as may be determined by relatives

  3. Unlimited

  4. (a) or (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a HUF business, the liability of the karta is unlimited. The affairs of the business are managed by the head of the family, known as karta. In a Hindu Undivided Family business only the male members get a share in the business by virtue of their being part of the family. A Hindu Undivided Family is an extended family arrangement prevalent among Hindus of the Indian subcontinent. It came into existence as per Hindu Inheritance Laws of India.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

The liability of each member of the HUF business is _____________.

  1. Limited to the extent of share of KART

  2. Limited to the extent of his share in the business

  3. Unlimited

  4. Limited to the extent as may be determined by relatives
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The liability of each member of the HUF business is limited to the extent of his share in the business. In a Hindu Undivided Family business only the male members get a share in the business by virtue of their being part of the family. A Hindu Undivided Family is an extended family arrangement prevalent among Hindus of the Indian subcontinent. It came into existence as per Hindu Inheritance Laws of India.

Multiple choice organization of commerce and management ownership structures - sole proprietorship and joint hindu family business hindu undivided family business introduction to huf joint hindu family business

Which of the following can be treated as advantage of HUF form of business?

  1. The liability of the co-parceners is limited, except for that of karta which makes the karta to manage the business in the most efficient manner.

  2. A HUF business is not affected by the insolvency or death of any member including that of karta.

  3. Both (a) and [b)

  4. (a)or(b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a Hindu Undivided Family business only the male members get a share in the business by virtue of their being part of the family. A Hindu Undivided Family is an extended family arrangement prevalent among Hindus of the Indian subcontinent. It came into existence as per Hindu Inheritance Laws of India. Following can be treated as advantage of HUF form of business:

a) The liability of the co-parceners is limited, except for that of karta which makes the karta to manage the business in the most efficient manner.
b) A HUF business is not affected by the insolvency or death of any member including that of karta.

Multiple choice organization of commerce and management ownership structures - cooperative society features, merits and demerits, formation and management of a cooperative society meaning and features of cooperative society cooperative organisation

Which of the following is a voluntary association of persons who work together to promote their economic interest?

  1. Sole proprietorship

  2. Company

  3. Co-partnership

  4. Co-operative
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A Co-operative Society is an artificial voluntary association of people who work together to promote their economic interest and in order to achieve common goals. 

These society are incorporated with some social motives and they often have separate legal body and common seal.

Multiple choice organization of commerce and management ownership structures - cooperative society features, merits and demerits, formation and management of a cooperative society meaning and features of cooperative society cooperative organisation

Statement $1$:
The liability of members of co-operative society remains limited to the extent of capital contributed by them.
Statement $2$:
The members of co-operative society are personally liable of co-operative society.
Select the correct answer from the options given below.

  1. Both $1$ and $2$ are true
  2. $2$ is true but $1$ is false
  3. $1$ is true but $2$ is false
  4. Both $1$ and $2$ are false
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A Co-operative Society is an artificial voluntary association of people who work together to promote their economic interest and in order to achieve common goals. The liability of the members of the cooperative societies are limited to the extent of their capital contribution in the society and in case of any insolvency no creditors can claim the personal assets of its members. 

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

In the event of death of partner, the amount of General Reserve is transferred to partner's capital Accounts in ______________ .

  1. The new profit-sharing ratio.

  2. The old profit-sharing ratio.

  3. The capital ratio.

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

The amount of general reserve is transferred to the capital accounts of all the partners in their old profit sharing ratio. This is done to give the deceased partner's nominee the required amount of share in profits of the firm. So, All Partners' Capital Accounts are credited with their respective shares.

Multiple choice book keeping and accountancy accounting for retirement and death of partner reconstitution of partnership (retirement of partner) accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

If the firm has sufficient cash to pay off the amount due to the deceased partner, it can pay the amount immediately, this is known as ___________.

  1. Lump sum payment method

  2. Instalment payment method

  3. Annuity method

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

Business of a partnership firm may not come to an end due to the death of a partner. Other partners may shall continue to run the business of the firm. Readjustments takes place in case of death of a partner likewise the case of retirement of a partner. Whenever, a partner dies the continuing partners make gain in terms of profit sharing ratio. Therefore, the remaining partners arrange for the amount to b paid to discharge the claim of deceased partners. Assets and liabilities are revalued, value of goodwill is raised and surrender value of joint life policy, if any, is taken into account. Revaluation of profit and reserves are transferred to capital or current accounts of partners. Lastly, final amount due to the retiring partner is determined and discharged.

There are two ways in which amount due to deceased partner is discharged:

1. Lump sum payment method - In this, if the firm has sufficient cash to pay off the amount due to the deceased partner, it pay the amount immediately, this is known as lump sum payment method.

2. Installment payment method - In this, if the firm  does not have sufficient cash to pay off the amount due to deceased partner, it pay the amount in installments, this is known as installment payment method.

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

In which of the following events public notice is not required?

  1. Death of a partner.

  2. Insolvency of a partner.

  3. Retirement of a sleeping partner.

  4. All the the above.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Public notice is required to be given at the time of retirement of a partner otherwise retiring partner may not be discharged from his liability towards third party.
There are some cases when public notice is not required:
1. On death of a partner - the estate of a deceased partner or the legal representatives of a deceased partner cannot be held liable for any act of the firm, performed or done after his death, even if partnership business is carried on by the surviving partners in the old name of the firm. death of any partner itself is a notice.
2. Insolvency of a partner - When a partner is declared as insolvent, his liability is terminated after his insolvency. When a person ceases to be a partner, from the date of in solvency, he and his estate is no longer held to be liable for any act of the partnership firm done after his insolvency whether the notice of his insolvency has been given or not.
3. Dormant or sleeping partner - As dormant partner does not take any part in the conduct or management of the firm and his existence as a partner is not reflected by the name of the firm, he is not known to the person concerned retires from a firm, no public notice is necessary to terminate his liability.