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 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 person whose behaviour arouses misunderstanding that he is a partner in the firm but actually he is not,is called __________.

  1. nominal partner

  2. dormant partner

  3. ostensible partner

  4. partner by estoppel.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Partner by Estoppel or holding out - If person styles the character of a partner in a business before a third party (outsiders) by words or in writing or by his act, he is called a partner by estoppel. The third party mistaking him as a partner in the business advances loans on his creditability, that person would be personally responsible for the liability attaching to the position of 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 type of partners is not personally liable?

  1. Active

  2. Dormant

  3. Nominal

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

Partnership arises from contract and a minor is not competent to enter into contract. Therefore, strictly speaking, a minor cannot be a full-fledged partners. But with the consent of all the partners he can be admitted into partnership for benefits only. He is not personally liable to third parties for the debts 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

Partnership gives special protection to minors.

  1. Partly true

  2. False

  3. Partly false

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

Partnership law provides specific protections for minors, such as limiting their liability to their share in the firm, which is a form of special protection compared to adult partners who have unlimited liability.

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

At the time when a new partner enters, Good will _________________________.

  1. belongs to all partners, new and old

  2. belongs only to the new partner who is going to be admitted.

  3. belongs only to the old partner who have credited it

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

Goodwill is an intangible asset built by the existing partners over time. Therefore, when a new partner is admitted, the existing goodwill belongs to the old partners who created it.

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

If the behavior of a person shows that he is a partner in a firm (when actually he is not), such a person is known as _________.

  1. Nominal partner

  2. Sleeping partner

  3. Sub-partner

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

A person who represents themselves as a partner, or allows others to do so, is liable as a partner by estoppel to anyone who relies 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 _________ 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 partner is like an undisclosed principal because they are liable for the firm's acts, but their identity is not known to third parties dealing with 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 a minor to be admitted to a partnership firm _____________.

  1. all the partners should agree
  2. there should be $2$ major partners

  3. minor can not be admitted in a partnership firm

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

The admission of a minor to the benefits of a partnership requires the consent of all existing partners. The requirement of '2 major partners' is a standard interpretation of the minimum number of partners required to form a 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

As per partnership Act Minor on becoming major _______________.

  1. liability becomes unlimited

  2. liability becomes unlimited only when he accepts the partnership

  3. he has only rights and no liabilities

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

When a minor attains majority, they have a choice to either become a partner or leave the firm. If they choose to become a partner, their liability becomes unlimited from the date they were admitted to 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

New incoming partner pays his share of goodwill in cash, and profit sharing ratio of old partner is changed, Goodwill be distributed among old partners ____________.

  1. as their old profit ratio

  2. according to new ratio

  3. according to sacrifice ratio

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
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 _________ is responsible for doing all acts, matters and things as are required to be done by LLP as per the Act.

  1. Designated Partner

  2. Active Partner

  3. Designated Director

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

In an LLP, the Designated Partner is the individual specifically appointed to ensure compliance with the provisions of the LLP 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

Robert is a Sleeping Partner in a Firm. He detected a mistake in the accounts of the Firm. So he wants to check the complete accounts of the Firm. But the other Partners objected it. Is the objection is valid?

  1. Void, their objection is wrong.

  2. Valid, they can object.

  3. Valid, they have the right not to give the accounts to the Sleeping Partner.

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

Every partner, regardless of whether they are active or sleeping, has a statutory right to access, inspect, and copy the books of accounts 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

Co-ownership is not always the result of an agreement; it may arise ________.

  1. By the operation of law

  2. From status

  3. By the operation of law or from status

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

Co-ownership refers to the division of ownership of something into two or more heads. This act can be passed through an agreement between the co-owners or even it can be done through the operation of law which will be bound on all the 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

A change in the nature of the business can only be brought about by the consent of __________.

  1. Majority partners

  2. All the partners

  3. Any two partners

  4. Any five partners
Reveal answer Fill a bubble to check yourself
B 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. Therefore, any change in the nature of the business can be brought forward only by the consent of all the partners mentioned in the partnership deed. 

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

How you will classify partner who do not invest or participate in the management of the firm but only give their name to the business or firm?

  1. Active or working partner

  2. Sleeping or dormant partner

  3. Nominal partner

  4. Partner in profits only
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. 

According to the Partnership Act, Nominal partners are the partners who do not invest their money into the business and have no share in the profit or losses but they just give their name as the partner for their goodwill in the business.

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
According to the Partnership Act, a partner by estoppel refers  to the partner who verbally or in written or through some conduct represents himself or knowingly permits himself to be represented as a partner in a firm and taking advantage of the goodwill of the firm. These kind of partners are liable to all the third parties arose due to them. Therefore, B is a partner by estoppel.