Tag: elements of business

Questions Related to elements of business

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.

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

  1. Sleeping partner

  2. Partner by estoppel

  3. Working partner

  4. Sub-partner

Show answer
Correct Option: B
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. 

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

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

  1. Sleeping partner

  2. Working partner

  3. Sub-partner

  4. Partner by holding out

Show answer
Correct Option: D
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.

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.

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

  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

Show answer
Correct Option: C
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. 

When the minor elects not to become a partner, his rights and liabilities _________.

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

  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

Show answer
Correct Option: A
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.

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

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

  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

Show answer
Correct Option: B
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.

For admitting a minor into the benefits of the partnership, which of the following is required?

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

  1. Consent of majority partners

  2. Consent of parent or guardian

  3. Consent of all the partners

  4. Consent of $3/4$th partners

Show answer
Correct Option: C
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. 

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?

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

  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

Show answer
Correct Option: C
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. 

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.

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

  1. Correct

  2. Incorrect

  3. Partly correct

  4. Partly incorrect

Show answer
Correct Option: B
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.

A minor is personally liable for the debts of the firm ________________.

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

  1. Correct

  2. Incorrect

  3. Partly correct

  4. Partly incorrect

Show answer
Correct Option: B
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.

If minor becomes or elects to become a partner, his position will be ____________________________.

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

  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

Show answer
Correct Option: D
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.