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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 business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Application for dissolution of a firm on the ground of misconduct of a partner can be made by :

  1. Any partner

  2. Any partner other than who is guilty of misconduct

  3. Police officer

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

Partnership completely depends on trust and good faith. A partner acts as both agent and principal. If a partner misconduct then it can affect the image of firm. On the basis of this, any partner other than who is guilty of misconduct can file a suit for dissolution.  

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

XY Associates a partnership firm is having two partners X and Y. In a fatal road accident X lost his life. The firm now stands __________.

  1. Dissolved

  2. In temporary suspension of business

  3. Liquidated

  4. Not affected at all
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Partnership is an agreement between two or more than two persons. Minimum two persons are required for partnership. In this after the death of X, only Y left. No single person can continue the partnership. So the firm stands dissolved.

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

State which statement(s) is/ are true :

  1. Dissolution of firm necessarily involves dissolution of partnership.

  2. Dissolution of partnership necessarily involve dissolution of the firm.

  3. Both

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

Dissolution of partnership is different from dissolution of firm. Dissolution of partnership does not necessarily involves dissolution of firm. But if there is dissolution of firm then it will lead to dissolution of partnership, because in dissolution of firm all assets are sold, liabilities are paid and business ceases to exist. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

A partnership firm is dissolved except by ___________.

  1. Expiry of term

  2. Due to marriage of any partner

  3. Due to death of any partner

  4. Due to insolvency of any partner
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A partnership firm is dissolved when all partners become insolvent or all except one become insolvent. In the case of death of partner also , court may order to dissolve the firm. A partnership firm gets automatically dissolved after expiry of fixed period of time for which partnership firm is formed. But partnership firm can not be dissolved due to marriage of any partner, because marriage does not affect the working of firm. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Application for dissolution of a firm on the ground of permanent incapacity of a partner can be made by ________.

  1. Any partner

  2. Any partner other than who is of permanent incapacity

  3. Police officer

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

If a partner has become permanently incapable of performing his duties as a partner then another partner can sue for dissolution of firm. Incapable of performing his duties can be due to any reason like going abroad for long time or imprisonment of partner for a long time. As a partner would not be able to perform his duties, the court may order for dissolution. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Court may order dissolution of a firm on any other grounds which  _______ just and equitabe .

  1. it considers

  2. are prescribed in the act as

  3. the partners considers

  4. the registrar of firms considers
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Dissolution can be done by suing the other partners and bringing the case to the court. According to Section 44 , if court finds it just and equitable then court may order for dissolution. Reason could be insolvency of a partner, Death of partner, when a partner becomes of unsound mind etc. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

If no public notice of dissolution of a firm is given :

  1. All the partners continue to remain liable to third party

  2. The firm is adjudged defaulter

  3. The firm stand dissolved

  4. Still the firm is not liable to third party
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 72 lays down the manner and the cases in which the public notice of certain matter relating to partnership firm is to be given. According to this section, If on dissolution of a registered firm a public notice is not given, the partners shall continue to be liable to third parties for any act done by any of them which would have been an act of the firm done before dissolution.  

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

In which of these cases a partner give notice for dissolution of partnership? 

  1. If he has tacit support of at least 2/3rd support of other partners

  2. In case of particular partnership

  3. In case of Partnership at will

  4. Not permitted under any circumstances
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In case  of partnership at will a partner can dissolve it by giving notice of dissolution to other partners. The notice should be communicated to other partners as mentioned in agreement and if not mentioned then mode of communication should be reasonable. The notice should be clear and should not be confusing. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Which of these cannot be cause of dissolution of a firm?

  1. Ill health of partner

  2. Insanity

  3. Misconduct

  4. Transfer of interest
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to Section 44 of the Indian Partnership Act, Insanity of a partner and Misconduct by partner can be cause of dissolution of firm by court. If a partner has transferred his interest to third parties, other partners may apply to the firm to dissolve the firm. But ill health of a partner can not be the cause of dissolution of a firm because ill health is temporary. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

If no public notice is given then :

  1. Minor will be demand to have become a full fledged partner

  2. Liability of partner continues in case of expulsion, retirement or dissolution of the firm

  3. Both

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

Section 72 lays down the manner and the cases in which the public notice of certain matter relating to partnership firm is to be given. if no public notice is given then the partners continue to be liable to third parties in case of dissolution, retirement and expulsion. Minor partner within six months of attaining eighteen years of age choose to become or not to become partner and specify the same by way of public notice. If no public notice is given then minor deemed to have become a partner of the firm. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

A firm is not liable for the act of an insolvent partner ____________ .

  1. After the date of the order of adjudication

  2. All acts done before the order of his adjudication

  3. If due notice thereof is given

  4. If so ordered by the court
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  1. When a partner in a firm is adjudicated an insolvent he ceases to be a partner on the date on which the order of adjudication is made, whether or not the firm is dissolved. 
    2. Where under a contract between the partners the firm is not dissolved by the adjudication of a partner as an insolvent, the estate of a partner so adjudicated is not liable for any act of the firm and the firm is not liable for any act of the insolvent, done after the date on which the order of adjudication is made. 
Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Which of the following duties can be varied by an agreement between the partners?

  1. Duty to work without remuneration.

  2. Duty to contribute to losses.

  3. Duty to indemnify for losses caused due to willful negligence.

  4. All the three.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Partners can determine their mutual rights and duties by an agreement called partnership deed. Partnership Deed is an important part of partnership. It clearly states the duties of partners. Any change in duties such as duty to work without remuneration, duty to contribute to losses, duty to indemnify for losses caused due to willful negligence can be made by making changes in partnership deed.

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

The court may not order dissolution of a firm on permanent incapacity of a ______________ .

  1. Dormant partner

  2. Active partner

  3. Managing partner

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

Dormant partner is a partner who takes no share in the active business of partnership but share profits or losses.  Permanent incapacity of a dormant partner does not have much effect on partnership because dormant partner does not manage its working. But permanent incapacity of active partner or managing partner may stop the working of business. So the court may not order for dissolution on permanent incapacity of a dormant partner. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Guarantee given to a partner 'A' by the other partners 'B & C' means _________________.

  1. In case of loss 'A' will not contribute towards that loss.

  2. In case of insufficient profits 'A' will receive only the minimum guarantee amount.

  3. In case of loss or insufficient profits 'A' will receive the minimum guarantee amount.

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

Guarantee given to a partner means partner will be given a fixed minimum amount of profit. and if any deficiency arise will be met by the other partner.  So in this A is given guarantee of minimum amount and if there is  loss or insufficient profit then B and C will pay the amount remaining short.

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

A partner by holding out is personally liable to _______________ .

  1. all outsiders

  2. all existing suppliers

  3. who has given credit to the firm on his representation

  4. to all who have given credit to the firm
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A partner by holding out means a person who is not a member of firm but allows himself/herself to be represented as a partner. Such person is responsible to person who has given loan to firm on his representation because loan has been given by assuming that he/she is member.