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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 elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

Holding out partner is based on the principle of _______.

  1. protecting public interest

  2. Estoppel

  3. both a) & b)

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

The doctrine of holding out is based on the principle of estoppel, which prevents a person from denying a fact they have previously represented as true. If a person represents themselves as a partner, they are estopped from denying that status to third parties who relied on that representation.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

A Nominal partner gets _______.

  1. no share in profits

  2. equal share in profits

  3. share in profits proportionate to*contribution

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

A nominal partner is one who lends their name to the firm for reputation purposes but does not contribute capital or participate in management. Consequently, they generally do not receive a share of the profits.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

Dormant Partner is also known as ________.

  1. Sleeping Partner

  2. Active Partner

  3. Nominal Partner

  4. Sub-Partner.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A dormant partner, also known as a sleeping partner, contributes capital and shares in profits but does not take an active part in the daily management of the firm.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

A introduces B to C as a Partner in his business. B, in fact, was not a Partner but he did not deny the statement. C advanced a loan to A. A could not repay the loan. C can hold B responsible for the repayment of loan because __________.

  1. B is a Sleeping Partner

  2. B is a Sub-Partner

  3. B is a Dormant Partner

  4. B is a Partner by Estoppel.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under the doctrine of holding out, if a person allows themselves to be represented as a partner, they become liable to third parties who extend credit to the firm based on that representation. This is known as partnership by estoppel.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

Dormant partner ______________.

  1. never takes part in business activities.

  2. is not liable for any act done by other partners.

  3. will not share losses of the firm.

  4. existence in partnership is invalid.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A dormant or sleeping partner is characterized by their lack of active participation in the day-to-day management of the firm's business activities, even though they are still liable for the firm's debts.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

Retiring Partner continues to be liable for acts of the Firm done __________.

  1. upto the date of admission of a new Partner.

  2. upto the date of giving public notice of retirement.

  3. upto the close of the financial year in which he retires.

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

A retiring partner remains liable for all debts and obligations incurred by the firm until a public notice of their retirement is given. This protects third parties who may still believe the partner is part of the firm.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

For the acts of the Firm ________.

  1. minor is personally liable.

  2. minor's share is liable.

  3. guardian is personally liable.

  4. there is no liability at all for or on behalf of the minor.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A minor can be admitted to the benefits of a partnership, but they are not personally liable for the firm's debts. Only their share in the partnership assets is liable for such obligations.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

A Retiring Partner is entitled to Profits of the Firm?

  1. Upto $31^{st}$ March

  2. When last accounts is made up

  3. Up to retirement date

  4. Not entitled to any Profit.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A retiring partner is entitled to their share of the profits earned by the firm up to the date of their actual retirement.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

Retiring Partner may be discharged from liability to any third party for acts of Firm done before his retirement by ________.

  1. an agreement made with such third party and the Partners of reconstituted Firm

  2. implied from the course of dealing between the third party and reconstituted Firm after he had knowledge of the retirement

  3. either (a) or (b)

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

A retiring partner can be discharged from liability for past acts through an express agreement with the creditors and the remaining partners, or through an implied agreement based on the course of dealing.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

In case of Partnership at Will, Notice of intention to dissolve the Firm may be served by ___________.

  1. sleeping partners only

  2. any of the working partners

  3. any of the partners

  4. majority of the partners.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a partnership at will, the partnership can be dissolved by any partner giving notice in writing to all other partners of their intention to dissolve the firm.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

When a Partner is expelled otherwise than in good faith, it is ______.

  1. generally valid

  2. valid vis-a-vis third parties

  3. in restraint of trade

  4. null and void.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under the Indian Partnership Act, the expulsion of a partner must be done in good faith and in accordance with the powers conferred by the partnership agreement. If it is not in good faith, the expulsion is null and void.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

Loss arising out of Partners' insolvency shall be made up by ___________.

  1. that Partners' estate

  2. that Partners' Legal Heirs

  3. the Firm itself

  4. the Solvent Partners.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If a partner becomes insolvent, their share of the loss must be borne by the remaining solvent partners in their profit-sharing ratio.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

Persons who have entered into partnership with one another are called individually __________________.

  1. Firm

  2. Co-owner

  3. Firm name

  4. Partner
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Persons who have entered into a partnership agreement are collectively called a 'firm' and individually called 'partners'.

Multiple choice elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

The private property of a partner should be used to ________.

  1. Pay his private debts first and if there is any surplus it can be used to pay firms liabilities

  2. Pay firms liabilities first and if there is any surplus it can be used to pay private debts

  3. (A) and (B)

  4. (A) or (B)
Reveal answer Fill a bubble to check yourself
C Correct answer