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 elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Which of the advantages of LLP states that one partner is not responsible or liable for another partners misconduct or negligence.

  1. Flexible agreement

  2. Separate legal entity

  3. Fewer compliance requirements

  4. Easy to wind-up
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Separate legal entity of LLP states that one partner is not responsible or liable for another partners misconduct or negligence. Limited Liability Partnership can be defined as form of partnership where the partner or investor's liability is limited to the amount invested in the company.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Identify the disadvantage of LLP.

  1. An LLP can be structured in such a way that one partner has more rights than another.

  2. An LLP is much easier and cheaper to run than a private limited company.

  3. The partners are free to draft the agreement as they please, with regard to their rights and duties.

  4. Non-compliance fines can escalate to Rs. 5 lakh for a single year.
Reveal answer Fill a bubble to check yourself
A,D Correct answer
Explanation

Limited Liability Partnership can be defined as form of partnership where the partner or investor's liability is limited to the amount invested in the company. LLP combines the advantages of both the Company and Partnership into a single form of organization. Disadvantages of LLP are as follows:a) An LLP can be structured in such a way that one partner has more rights than another.

b) Non-compliance fines can escalate to Rs. 5 lakh for a single year.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

An LLP has partners unlike a company which has shareholders.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A LLP has partners unlike a company which has shareholders- this is a true statement. Limited Liability Partnership can be defined as form of partnership where the partner or investor's liability is limited to the amount invested in the company. LLP combines the advantages of both the Company and Partnership into a single form of organization.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

The partnership may come to an end due to the _________.

  1. death of a partner

  2. insolvency of partner

  3. by giving notice

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

According to the section 39 of the Indian Partnership Act, 1932, the dissolution of the partnership firm may happen in the following cases:

  1. Death of the partner.
  2. Insolvency of the partner.
  3. By giving notice.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Whenever a new partner is added to the firm the firm is _______.

  1. dissolved

  2. continued

  3. not affected

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

When a new partner joins a partnership the old partnership is dissolved and a new partnership is formed . Accounting for admission of new partner depends on the nature of arrangement between the existing partners and the new partners. And the new partner contributes according to the agreement.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Partnership at will can be dissolved by any partner by ________.

  1. communicating with the principal

  2. not allowed

  3. giving due notice to other partners

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

If a partnership is at will, it can be dissolved by any partner giving a notice to other partners. The notice for dissolution must be in writing. The dissolution will be effective from the date of the notice. In case no date is mentioned in the notice, and then it will be dissolved from the date of receipt of notice. A notice once given can not be withdrawn without the consent of all the partners.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Change in the partnership firm mean  ___________________.

  1. new partner is introduced

  2. a partner is adjudicated as an insolvent

  3. both a and b

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

When a new partner is admitted in the partnership and in the consideration of new partner towards the capital of the partnership of the partners . From the date new partner subject to the terms and conditions of the partnership deed , the profit and loss sharing ratio changes , the old partnership shall be liable for all the old debts and liabilities they shall be indemnity and also all the assets and rights of partnership firm against such debts and liabilities and against all proceedings cost , claims in respect thereof.

         Where a partner in a firm is adjudicated as insolvent he ceases to be a partner on the date on which the order of adjudication is made whether or not the firm is thereby dissolve.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Good will of the business of a partnership firm is the property of _________.

  1. partners

  2. partner who gave his property to firm

  3. partnership firm

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

A business builds up some reputation after it has continued for some time . If the reputation is good, the firm will come to acquire a fixed clientele in the sense that a number of customers will automatically make their purchases from the firm . This is a very valuable asset even if one can not touch or see it. The asset is known as goodwill.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

A partner may apply to the court for dissolution of the firm on _____________.

  1. insanity of a partner

  2. misconduct of a partner

  3. perpetual losses in business

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

If a partner has become of unsound mind in which case the suit may be brought as well by the next friend of the partner who has become of unsound mind as by any other partner.

  If there is any misconduct by a partner other than the suing partner due to which a firm suffered losses , then the court may order the dissolution of the firm . Misconduct or guilty of conduct which is likely to effect prejudicial the carrying on of the business . Then the other partner can sue the partner for misconduct.

 In case the business of the firm cannot be carried on save as a loss or on any ground which renders it just and equitable that the firm should be dissolved.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Which of the following are the rights of a partner in a partnership firm?
X. To take part in the conduct and management of the business.
Y. To receive remuneration for active working in the firm.
Z. To receive interest on the capital invested in the firm W. To receive share in the profit.
Which of the following is/are the correct options?

  1. X and Y

  2. X and Z

  3. X and W

  4. X, Z and W
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

X)Section $12$(b) - Every partner is bound to attend diligently to his duties in the conduct of the busines-section.

Y)Section $13$(a) A partner is not entitled to receive remuneration for taking part in the conduct of the business.
Z)Section $13$(c) Where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of profits.
W)Section $13$(b) The partners are entitled to share equally in the profits earned and shall contribute equally to the losses sustained by the firm.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

In which of the following cases a partnership firm is re-constituted?

  1. Admission

  2. Retirement

  3. Death

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

When the firm needs additional capital or managerial skills or both, the firm admits a new person as a partner of the firm. However, he is admitted into the firm with the consent of all the partners unless otherwise stated in the partnership deed. So in admission of a partner it bring change in firm.


On retirement of a partner there be withdrawal from firm will bring about a change in the composition of partners along with a change in their relationship.


When a partner dies, like retirement of a partner, it brings about a change in the composition of partners and in their mutual relationship because the remaining partners continue to run the firm with new profit sharing ratio.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

S a partner in AB and Sons has transferred his interest in the firm to D. Is the transfer correct?

  1. No

  2. Yes

  3. D will decide

  4. Court will decide
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to Section $29$ of the Indian Partnership Act, $1932$ a partner may transfer his interest in the firm by sale, mortgage or change. The transfer may be absolute or partial. The transfer donot provide transfree to interfere in the working of the organization, he has the right to share of profit only.

Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

The court may not dissolve the firm in case of ____________.

  1. insanity of a partner

  2. permanent in capability of a partner

  3. retirement of a partner

  4. misconduct of a partner
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely:-

(a) that a partner has become of unsound mind, in which case the suit may be brought as well by the next friend of the partner who has become of unsound mind as by any other partner.
(b) that a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner.
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business regard being had to the nature of the business.
(d) that a partner, other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm of the conduct of its business; or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him.
(e) that a partner, other than the partner suing, has in any way transferred the whole of his interest in the firm to a third party, or has allowed his share to be charged under the provisions of rule $49$ of Order XXI of the First Schedule to the Code of Civil Procedure, $1908$, or has allowed it to be sold in the recovery of arrears of land revenue or of any dues recoverable as arrears of land revenue due by the partner.


Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

Which of the following cases, a partnership firm may be dissolved?
X. On the death of a partner
Y. On the insolvency of a partner
Z. On the retirement of a partner
Correct option is __________.

  1. X and Y

  2. X and Z

  3. Y and Z

  4. X, Y and Z
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A partnership firm is dissolved upon the death, insolvency, or retirement of a partner, unless the partnership agreement provides otherwise.