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

Where a partner cannot be clear his debts on dissolution, the other partners must clear these debts in the following manner ___________________.

  1. Partnership profit/loss sharing ratio

  2. Debts are shared equally

  3. In the ratio of their last agreed capital balance

  4. Both a & b
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a partner cannot pay their share of the deficiency, the remaining solvent partners must bear the loss in proportion to their last agreed capital balance, according to the Garner vs Murray rule.

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

LLP shall have atleast ___ Partners

  1. 2

  2. 4

  3. 3

  4. 5
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
An LLP need to have atleast two designated partners (DPs) who was responsible for working of an LLP. The designated partners need to have DIN or DPIN. So if the LLP has 3 partners out of which 2 are DPs, each one of the DPs needs to have a DIN / DPIN. To start an LLP, you require at least two partners.
Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

N and Z, the co-owners of a house, use the house as a hotel managed either by themselves or by a duly appointed manager for their common profit. Is there a partnership relation between the parties?

  1. Yes

  2. No

  3. Partly yes

  4. Can't say
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If N and Z, the co-owners of the house, use the house for hotel management purpose then it will not be considered as any partnership relation because there is no contract between them in any manner, either it is verbal or written regarding the partnership agreement. 

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

Upon dissolution, which is the proper order for application of the Firm's assets?
I.     Payment of Debts & Liabilities of the Firm
II.    Payment of Partner's Loan
III.  Payment of Partner's Capital
IV.   Distribution of Surplus to Partners in their Profit Sharing Ratio.

  1. I, II, III, IV

  2. I, II, IV, III

  3. II, III, IV, I

  4. IV, II, III, I.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The legal order for asset application is: (1) third-party debts, (2) partners' loans, (3) partners' capital, and (4) surplus distribution.

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

Where the partnership is at will, the firm may be dissolved by __________ giving notice in writing to all the other partners of his intention to dissolve the firm.

  1. Any partner

  2. Two partners

  3. Three partners

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

The partnership which is started at the will of the partners where the firm stands dissolved whenever the partners want it to as there is no fixed period or provision regarding the business duration and determination of the firm. Such a type of partnership is known as partnership at will. Any partner can dissolved the firm by giving a prior notice regarding the dissolution mentioning a legitimate reason behind the dissolution. 

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

Where the partnership is at will, the firm is dissolved as from ______________________-.

  1. The date mentioned in the notice as the date of dissolution and if date is not mentioned in notice then such notice is void

  2. The date of notice whether date of dissolution is mentioned in notice or not

  3. The date mentioned in the notice as the date of dissolution and if no such date is mentioned, as from the date of communication of the notice

  4. The date when notice is actually received by all other partner
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
The partnership which is started at the will of the partners where the firm stands dissolved whenever the partners want it to as there is no fixed period or provision regarding the business duration and determination of the firm. Such a type of partnership is known as partnership at will. 
Any partner can dissolved the firm by giving a prior notice regarding the dissolution mentioning a legitimate reason behind the dissolution.
Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

A partner can transfer his interest so as to substitute the transferee in his place as the partner, without the consent of all the other partners; a member of company cannot transfer his share to any one he likes.

  1. False

  2. True

  3. Partly true

  4. Partly false
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
A company is a separate legal artificial body with a name and common seal by the law. In a company, the owners of the company that is the shareholders can transfer their ownership in the stock exchange market whenever they find it necessary without the consent of any other shareholder. 
Multiple choice elements of business partnership 1 - meaning, definition, characteristics and kinds types of partnership types of partnerships dissolution of partnership

To whom the property of the firm belongs?

  1. Partners

  2. Working partner of the firm

  3. Firm and not to individual partners

  4. Property belongs to both partners and firm
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A partnership basically refers to the contract between two or more people who have agreed to carry on certain business in order to achieve common goals. In the absence of any partnership deed, all the property, rights and interest contribute by the individual partners, all the property acquired in the course of the business and the goodwill of the business is considered as the property of the firm. 

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

Identify which sentence is correct and which is incorrect.
A. A sub-partner can bind the firm or other partners by his acts.
B. Sub-partner has rights or duties towards the firm and does carry liability for the dents of the firm.
C. Minor partner is entitled to his agreed share
D. Minor can inspect books of account of the firm.
Select the correct answer from the options given.

  1. Sentence A & B are incorrect while sentence C and D are correct

  2. Sentence B & C are incorrect while sentence A & B are correct

  3. Sentence A, B & C are correct while sentence D is incorrect

  4. Sentence B, C & D are correct while sentence A is incorrect
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a partner of the firm agrees to share his own share of profits with an outsider then it is called sub-partners. They have no rights in the firms' business they just have share in the firms profit or loss and therefore other partners are not bound by the sub-partners act. 

A minor can be admitted as a partner in a partnership firm with the consent of all the partners in the agreement where the minor will share only the profits or gains of the firm and he will have no share in the firm's loss. The minor can even inspect the books of accounts of the firm. 

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 statement is incorrect as to a minor's position in a partnership firm?

  1. Minor is admitted to a share of partnership profits

  2. Minor is personally liable to contribute to the losses

  3. Minor is entitled to a share of the firm's property

  4. Minor can inspect and copy any of the firm's accounts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A minor can be admitted as a partner in a partnership firm with the consent of all the partners in the agreement where the minor will share only the profits or gains of the firm and he will have no share in the firm's loss. The minor can even inspect the books of accounts of the firm.

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

Upon dissolution, the firm's assets shall be first applied in paying the debts of the firm to third parties, shall thereafter be applied in payment of partners loan, shall be applied in ___________.

  1. In paying the debts of the firm to third parties

  2. Payment of partners loan

  3. Payment of partners capital

  4. Distribution of surplus to partners in profit sharing ratio
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Following the payment of third-party debts and partners' loans, the next priority is the repayment of partners' capital.

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

After dissolution of firm, any partner or his representative may restrain any other partner or his representative from carrying of similar business in the Firm Name or by using Firm's property for own benefit until _______________.

  1. The affairs of the firm are fully wound up

  2. Public notice of dissolution is given

  3. Dissolution deed is signed by all partners

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

Under the Indian Partnership Act, partners have the right to use the firm's name and property for winding up affairs after dissolution. Restraining others from using these for personal benefit is a protective measure that lasts until the winding-up process is complete.

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

Nitin, a partner of a firm dealing in computers gives an order for win worth Rs. $10,000$ in firm's name. Discuss the liability?

  1. The firm is liable to pay Rs. $10,000$

  2. The firm can sale the wine to other

  3. It does not relate to normal business of the firm. The firm will not be bound by it as act is not within implied authority of a partner
  4. The firm is liable to pay Rs. $10,000$ and if firm fails to pay then only Nitin will be liable to pay the amount
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Implied Authority is the authority that is not conferred by the mutual agreement between the partners and which is not bind on other partners. 

This authority is acted on the ordinary course of business and the firm is bound by such authority when the act is done in a normal way of carrying on the firm's business. 
These authority is also known as ostensible authority or apparent authority. Since the act is not related to the ordinary business of the firm. The firm is not liable to pay the amount. 

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

If at the time of admission partner pays premium then on dissolution, he is entitled to demand the return of a proportion of the premium if the partnership was for a fixed term and was dissolved before the expiry of that term, unless dissolution was caused by ___________________.

  1. Agreement

  2. Misconduct of the party seeking return of the premium

  3. Death of a partner

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

A partner is generally entitled to a refund of premium if the partnership is dissolved prematurely. However, this right is forfeited if the dissolution is caused by the partner's own misconduct, by an agreement that excludes such refunds, or by the death of a 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 are grounds for compulsory dissolution of the firm by court?

  1. Insanity of a partner

  2. Misconduct of a partner

  3. Perpetual losses in business

  4. All of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Insanity of a partner is one of the grounds for compulsory dissolution of the firm by court. Dissolution of partnership implies not only a complete closure or termination of partnership business but it also includes any change in the existing agreement among the partners due to a change in the number of partners.