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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

A person, who, by words spoken or written or conduct represents himself or knowingly permits himself to be represented as a partner in the firm is called _______________.

  1. Sleeping partner

  2. Working partner

  3. Sub-partner

  4. 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. 
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 partner can retire without giving public notice?

  1. Active partner

  2. Sleeping or dormant partner

  3. Nominal partner

  4. Partner in profits only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the Partnership Act, Sleeping or dormant partner are the partners who invest their money into the business and share the profit or losses but they do not participate in the functioning and management of the business. These partners can retire without giving a public notice to 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

If the behaviour of a person arouses misunderstanding that he is a partner in a firm(when actually he is not), such a person is estopped from later on denying the liabilities for the acts of the firm. Such person is called ________ and is liable to all third parties.

  1. Sleeping partner

  2. Partner by estoppel

  3. Working partner

  4. Sub-partner
Reveal answer Fill a bubble to check yourself
B 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. 

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 has not entered into a partnership agreement and conducts or represents himself as a partner in a firm is called _____________.

  1. Sleeping partner

  2. Working partner

  3. Sub-partner

  4. Partner by holding out
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
According to the Partnership Act, a partner by holding out 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 who has not yet entered into the partnership agreement to take the advantage of the goodwill 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, B & C are partners in a firm. A introduces D to X as a partner in business. D, in fact, was not a partner in the firm's business. D did not deny this statement. X advanced a loan of Rs. $20$ lakhs to the firm. On firm's failure to repay the loan X wants to hold D responsible for the repayment of the above loan. Referring to the provisions of the Indian Partnership Act, $1932$ decide whether X would succeed in recovering the loan from D.

  1. No. D is not liable

  2. A has to repay the loan

  3. Yes. D is liable as a partner by holding out

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
According to the Partnership Act, 1932, a partner by holding out 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 who has not yet entered into the partnership agreement to take the advantage of the goodwill of the firm. These kind of partners are liable to all the third parties arose due to them. Therefore, Rohit is also liable as a partner by holding out. 
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 the minor elects not to become a partner, his rights and liabilities _________.

  1. Continue to be those of a minor up to the date of giving public notice

  2. Are the same as that of all other partner

  3. Become ineffective since the partnership is invalid

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

According to the Partnership Act, 1932 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 firms loss. 

A minor has to give a public notice whether he wants to be admitted in the partnership firm or not within the six months on his attaining maturity or obtaining knowledge of his admission as a partner. 
If a minor elects not to be a partner then he will be not be regarded as a partner after the date of giving public notice.

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 the minor elects not to become a partner, his share is not liable for any acts of the firm done _________.

  1. After his admission to benefits of partnership

  2. After the date of giving public notice

  3. After the date of attaining majority

  4. After the date of dissolution of firm
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
According to the Partnership Act, 1932 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 firms loss. A minor has to give a public notice whether he wants to be admitted in the partnership firm or not within the six months on his attaining maturity or obtaining knowledge of his admission as a partner. If a minor elects not to be a partner then he will be not be regarded as a partner after the date of giving public notice.
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 admitting a minor into the benefits of the partnership, which of the following is required?

  1. Consent of majority partners

  2. Consent of parent or guardian

  3. Consent of all the partners
  4. Consent of $3/4$th partners
Reveal answer Fill a bubble to check yourself
C 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. A minor can be admitted as a partner to claim the benefits of the business only by the consent of all the 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

Rohit is not a partner in a particular firm. But, he represents himself or knowingly permits himself to be represented as a partner of that particular firm to Sanjay, who on the faith of such a representation gives credit to the firm. Is Rohit liable as a partner in the firm?

  1. No. Rohit is not liable

  2. No. Sanjay has to bear the loss

  3. Yes. Rohit is liable as a partner by holding out

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
According to the Partnership Act, a partner by holding out 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 who has not yet entered into the partnership agreement to take the advantage of the goodwill of the firm. These kind of partners are liable to all the third parties arose due to them. Therefore, Rohit is also liable as a partner by holding out. 
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

Where a minor on attaining majority elects to become a partner, he does not becomes personally liable as other partners to the third parties for all the acts of the firm done since he was admitted to the benefits of partnership.

  1. Correct

  2. Incorrect

  3. Partly correct

  4. Partly incorrect
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
According to the Partnership Act, 1932 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 firms loss. 
A minor has to give a public notice whether he wants to be admitted in the partnership firm or not within the six months on his attaining maturity or obtaining knowledge of his admission as a partner. 
If a minor elects himself as a partner then he will become liable of all the acts of the firm and other partners after the date of giving public notice.
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 minor becomes or elects to become a partner, his position will be ____________________________.

  1. His rights and liabilities will be similar to those of a full-fledged partner

  2. He will be personally liable for all the acts of the firm, done since he was first admitted to the benefits of the partnership

  3. His share of profits and property remains the same as was before, unless altered by agreement

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

According to the Partnership Act, 1932 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 firms loss. A minor has to give a public notice whether he wants to be admitted in the partnership firm or not within the six months on his attaining maturity or obtaining knowledge of his admission as a partner. If a minor elects himself as a partner then he will become liable of all the acts of the firm and other partners after the date of giving public notice. 

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 covered by general duties of partners?

  1. To carry on the business of the firm to the greatest common advantage of the firm

  2. To be just and faithful to each other

  3. To arrange for audit of accounts of the firm

  4. To keep and render true, proper and correct accounts of the partnership
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a partnership business, the partners cannot arrange for the audit of the accounts of the firm that is done by the Accounts authority of that company. 

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 right of partner?

  1. Every partner has a right to continue in the partnership and not to be expelled from it

  2. A partner has power to act in an emergency for protecting the firm from loss

  3. Every partner is entitled to share in the profits equally

  4. Every partner is entitled to the introduction of a new partner into the firm without consent other partner
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the Partnership Act 1932, a partner has no right for any introduction as new partner into the firm with the consent of 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

___________ can assign or transfer his partnership interest to any other person, so as to make him a partner in the business.

  1. No partner

  2. Every partner

  3. Working partner

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

According to the partnership Act 1932, no partner can assign or transfer their partnership to any third person to make him the partner of 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

Which of the following statement is correct in relation to assignment of profit by partner?

  1. To assignee will have right to ask for the accounts or to interfere in the management of the business

  2. The assignee would be entitled only to share the actual profits from the firm

  3. On dissolution of the firm, the assignee will be entitled to the share of the assets and also to accounts but only from the date of dissolution

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

When the firm is dissolved then the assignee distributes the asset and liability to all the partners who are entitled of the distribution from the date of the dissolution of the firm.