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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

Which of the following is not a form of organisation?

  1. Partnership

  2. Company

  3. Partners

  4. Sole Proprietorship
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Partners are the members who come together to form partnership. They are not the form of organisation, They are just the members of the organisation.

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

Which of the following statement is incorrect?

  1. The partnership comes into existence only by an agreement

  2. A person who received the profits is always partner

  3. The true test of partnership is the mutual agency i.e., agency relationship among partners

  4. A person who receives the profits is not necessarily a partner
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The receipt of profits is a prima facie indicator of partnership, but it is not conclusive. A person may receive a share of profits as a lender, an employee, or an agent without being a partner.

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

Which of the following people cannot be called partners?

  1. Minors

  2. Insolvents

  3. Co-owners without the agreement to carry on the business

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

Indian partnership Act , provides that though a minor cannot be a partner in a firm , but with the consent of all the partners for the time but, he may be admitted to the benefits of partnership by an agreement executed through his guardian with the other partners.

Insolvency means a person who is not able to pay it's debts . So he cannot be a partner of a partnership firm. No member can be partner without the agreement between a co-owners.

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

Partners are ____________ of the firm.

  1. owners

  2. employers

  3. agents

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

Partner is a representative of a partnership business. As a representative of a partnership firm, the partners should conduct business based on the the powers given to them. Partners are agents who may act on behalf 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 ____________ partner is like an undisclosed principal.

  1. sleeping

  2. active

  3. nominal

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

A sleeping or dormant partner is one who is a partner but whose name does not appear in any way as a partner and who is not known to the outside world as a partner. He has no duties to perform but has the right of access to the books of accounts which he can examine.

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 members of partnership firm are individually called as ________.

  1. director

  2. investor

  3. partner

  4. manager
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Persons who have entered into partnership with one another to carry on a business are individually called "partners". But the liability of partners with regard to its business is just like a proprietorship, is not limited to their share in business but also personal properties of the partners are at stake.

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 a minor to be admitted to a partnership firm _________.

  1. all the partners should agree
  2. there should be $2$ major partners and than a minor can be admitted

  3. minor can not be admitted in a partnership firm

  4. both a and b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Indian Partnership Act, provides that though a minor cannot be a partner in a firm,but with the consent of all the partners for the time being, he may be admitted to the benefits of partnership by an agreement executed through his guardian with the other partners . 

       A minor can only be admitted to the benefits of a partnership if there are already 2 major partners, as a contract cannot take place between 2 minors. In simple words, there should be a partnership between 2 major partners before a minor can be admitted to its benefits.

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 sub-partner is a person __________.

  1. who is sharing the profits of some partner

  2. who does not invest and shares the profits

  3. who invests but does not work

  4. a partner who only gives his name for partnership
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a partner enters into a contract with a third party to share his profit, the third party is called a sub partner. " The right to receive profits and bear losses becomes the asset of the sub partnership. A sub partnership which is in the receipt of the share of profit of a partner is the main partnership, has to be deemed to be a partner in the main partnership for the limited purpose of section 10(2-A) of the Income Tax act ".

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

XYZ partnership firm is a partnership firm between A and B. C posed that he is a partner in XYZ and earned profits form the market. C will be regarded as ______.

  1. holding out partner

  2. dormant partner

  3. nominal partner

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

C will be regarded as partner in profit . A partner in profit is a partner who shares in the profit only without being liable of the losses. He contributes capital to the firm but does not take part in the management of the business . He is liable to the third parties like other partners . Such a partner is generally inactive but associated with his money and goodwill.

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

Any partner who invests in the business but does not take active part in the business is ___________.

  1. secret partner

  2. sleeping partner

  3. active partner

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

A sleeping or dormant partner is one who is reality a partner but whose name does not appear in any way as a partner and who is not known to the outside world as a partner. He is liable to third parties if he is subsequently discovered by them. 

He has no duties to perform but has the right of access to the books of accounts which he can examine and copy. 
As a dormant partner he has no duty to perform,a firm is not dissolved on his insanity or permanent incapacity. He contributes capital and shares profits or losses in agreed 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

Each partner is __________.

  1. required to contribute capital in the partnership firm

  2. not required to necessarily contribute capital in the partnership firm

  3. requiredto work in the partnership firm

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

In partnership business, partners are to contribute capital to the firm and the individual amount of such capital is determined by an agreement . However, it is not  necessary for the partners to contribute capital in the partnership firm it is also not necessary that they are to contribute capital equally or in the profit sharing ratio.

There are instances where partners  contribute capital equally though they share profits unequally . It is also found that partners contribute capital unequally though they share profits equally.

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

Which type of partner is not personally liable?

  1. Active

  2. Dormant

  3. Nominal

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

A minor cannot be a  full fleged partner in the partnership firm , he is not personally liable for the debts of the third party. He is only admited for profit . He can be admiited only by consent of all 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

A partner who is entitled to share in the profits of a partnership firm without being liable to the losses, is called _________.

  1. partner is profits only

  2. sleeping partner

  3. active partner

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

A person who becomes a partner for sharing profits only is known as a partner in profits. 

He contributes capital to the firm but does not take part in the management of the business . He is liable to the third parties like other 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

Minor may be admitted in the firm for ________.

  1. sharing of profits

  2. mutual benefit

  3. both (a) and (b)

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

A minor cannot be a full partner, but they can be admitted to the benefits of an existing partnership with the consent of all 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

A partner who is entitled to share in the profits of a partnership firm without being liable to the losses, is called ___________.

  1. partner in profits only

  2. sleeping partner

  3. active partner

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

Partners in profit, is a partner who contributes in the capital , who dont share losses but only comes in the share for profit.