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Complete resources on Partnership Act
Complete resources on Partnership Business
1. The Indian Partnership Act, 1932 came into force on
(a) December 1, 1932
(b) October 1, 1932
(c) April 1, 1932
(d) None of the above
The law of partnership contained in the Indian Partnership Act came into force with effect from 1st October, 1932. Hence, option (b) is the correct answer.
2. Prior to enactment of The Indian Partnership Act, 1932, the law relating to Partnership in India were embodied in
(a) Companies Act
(b) Chapter XI of The Indian Contract Act
(c) Sale of Goods Act
(d) Chapter XII of The Indian Contract Act.
Prior to the enactment of The Indian Partnership Act, 1932, it was embodied in Chapter XI of The Indian Contract Act, 1872. Hence, option (b) is the correct answer.
3. Anil agrees with Sumeet, a trader trading with semi finished furniture, to carry on a business by sharing the resulting profit or loss of the business. The contract formed between Anil and Sumeet is called as
(a) Partnership
(b) Association of goldsmith
(c) Contract for labour work
(d) Agreement to sell.
Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. So, the contract between X and Y is that of Partnership. Hence, option (a) is the correct answer.
4. In case of Partnership, maximum number of members of banking company are :
(a) 10
(b) 20
(c) 30
(d) 50
As per s.11 of Companies Act, the maximum number of partners shall not exceed 10 in case of a banking business. Hence, option (a) is the correct answer.
5. The minimum number of partners in a partnership firm is
(a) There is no such limit
(b) 2
(c) 10
(d) 5
The minimum number of partners in a partnership firm is 2. Hence, option (b) is the correct answer.
6. To constitute a partnership agreement, it
(a) Must be in writing
(b) Can be spoken or written
(c) Can be implied from the conduct of parties
(d) Either (b) or (c).
The agreement between partners must not necessarily be in writing. It may be expressed (by words spoken or written) or implied from the conduct of the parties. Hence, option (d) is the correct answer.
7. X, Y and Z took over the running proprietary concern of Mr. Singh and continued in partnership under the agreement that Mr. Singh was to be paid 10% share of the profits for a period of 10 years from the date of takeover. Here:
(a) Mr. Singh is deemed as a Partner in the Firm
(b) Mr. Singh is not deemed as a Partner in the Firm
(c) The payment of share of profits to Mr. Singh is invalid
(d) The payment of share of profits to Mr. Singh is valid only for 3 years.
In this case, the payment to Mr. Singh is deemed to be payment in respect of business taken over by the firm of partners X, Y and Z and not as a partnership share. Hence, Singh is not deemed to be a partner of the firm. Hence, option (b) is the correct answer.
8. The true test of partnership is based on the principle of
(a) Mutual agency
(b) Mutual trust
(c) Mutual confidence
(d) Mutual agreement.
The main criterion to determine whether an association of persons is a partnership or not is based on the principle of mutual agency. Hence, option (a) is the correct answer.
9. Kiran and Uday purchased a second hand car, get it renovated for selling and shared the proceeds equally. They are
(a) Partners
(b) Co-owners
(c) Joint owner
(d) None of these.
Where two or more persons own a joint property, they are called as joint owners. The income or profits received from joint property is shared by all the joint owners. Hence, option (c) is the correct answer.
10. M and N formed a partnership firm to undertake construction of Terminal for South-Eastern Railway at Kharagpur. This partnership is a
(a) Partnership for a fixed period
(b) Partnership at Will
(c) Particular Partnership
(d) Partnership for an unlimited period.
According to s.8, if a person becomes a partner with another person in particular adventures or undertaking, such a partnership is called as Particular Partnership. In this case, X and Y entered into a partnership only for the purpose of construction of Terminal for Northern Railway at Pune. So, it is a Particular Partnership. Hence, option (c) is the correct answer.
11. A Particular Partnership is
(a) Void – ab – initio
(b) Voidable
(c) Stands dissolved when the venture is completed
(d) Unlawful.
According to s.8, if a person becomes a partner with another person in particular adventures or undertaking, such a partnership is called as Particular Partnership. On completion of such a venture, the partnership comes to an end. Hence, option (c) is the correct answer.
12. Which of these can be admitted as a Partner?
(a) Partnership firm
(b) HUF
(c) Corporate body
(d) All of the above.
A corporate body can enter into a contract of partnership as a single individual but not as a group of individuals comprising it. A minor, being incompetent to contract, cannot enter into contract. HUF and partnership firm are not separate legal persons in the eyes of law. So, they also cannot be admitted as a partner. A corporate is a legal person, so can be admitted in partnership[p. Hence, option (c) is the correct answer.
13. T is employed by ABC Bros., a Partnership Firm, and is entitled to a remuneration of Rs.30,000 p.m. plus 15% on the profits of the firm if profits exceed Rs.10 lacs. Hence,
(a) T is not deemed to be a partner in the firm
(b) T is deemed to be a partner in the firm
(c) T’s appointment is invalid
(d) T can claim only Rs.30,000 p.m. but not share of profits.
T is employed in the organization and is paid remuneration in terms of fixed sum and commission based on profit. But he is not a partner because he does not have authority of partners (like, deciding and controlling of business). Hence, T is an employee and not a partner of the firm. Hence, option (a) is the correct answer.
14. Which of these is a valid partnership?
(a) Partnership between two Joint Hindu Families
(b) Partnership between a firm and a minor
(c) Partnership between a person and a Joint Stock Company
(d) One minor and a separate HUF.
A Joint Hindu Family is not a separate legal person. So, it cannot become a partner in a firm. A firm is merely a collection of partners. It does not have identity of its own. So, a firm also cannot become a partner. A minor, is incompetent to contract and hence, they cannot become partner. But, a Joint Stock Company is a legal person having an identity of its own. So, a company and a person can form a valid partnership. Hence, option (c) is the correct answer.
15. Which of the following is not a kind of Partner
(a) Active partner
(b) Partners in losses only
(c) Partner in profits only
(d) Sleeping partner.
A person is not a partner if he does not receive any profits and bears losses only. So, partners in losses only cannot be considered as a partner. Hence, option (b) is the correct answer.
16. …………….. Partner does not take active part in the conduct of the business
(a) Dormant partner
(b) Minor partner
(c) Sub partner
(d) Partner by estoppel.
A Dormant (or Sleeping) partner is one who does not take an active part in the conduct of the business of the firm. Hence, option (a) is the correct answer.
17. R, S, T are partners where T is a sleeping partner who retires without giving a public notice. Hence,
(a) T is liable for the subsequent acts done by R and S after his retirement
(b) T is not liable for any subsequent acts done by R and S
(c) T’s retirement results in dissolution of partnership
(d) T becomes solely liable for entire debts of the firm.
A sleeping partner need not give a public notice of his retirement from the firm. He is not liable for any act of the firm done after his retirement. So, C, who retries without giving a public notice, is not liable for the subsequent debts incurred by A and B. Hence, option (b) is the correct answer.
18. Which of the following partners after their retirement from firm, is not liable by holding out, even if the public notice of retirement is not given?
(a) Nominal Partner
(b) Sleeping partner
(c) Representative of deceased partner
(d) Both (b) and (c).
No public notice is required in case of retirement from firm, by sleeping partner and representative of deceased partner. So, they are not liable by holding out, even if the public notice or retirement is not given. Hence, option (d) is the correct answer.
19. A and B agree to divide the profits of a business equally but the loss, if any, to be borne by A alone. The partnership agreement is
(a) Lawful
(b) Void
(c) Illegal
(d) Voidable.
In the partnership, the partners may lawfully agree that one or more of them shall not be liable to bear losses. In such a case, such partner is entitled to share the profits but is not liable for sharing of losses (called as a ‘partner in profits only’). So, this is a lawful agreement. Hence, option (a) is the correct answer.
20. 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 who could not make repayment of it. C can hold B responsible for the repayment of loan because:
(a) B is an ostensible partner
(b) B is an incoming partner
(c) B is a partner by estoppel
(d) B is a nominal partner.
A person, not being a partner, shall be a ‘partner by estoppel’ in a firm if he represents himself (by words spoken or written or by conduct) to be a partner in a firm or permits himself to be represented as a partner in a firm. In this case, B is not a partner in the business but he represents himself to be a partner. So, C can hold B responsible for the repayment of loan since B is a partner by estoppel. Hence, option (c) is the correct answer.
21. X, a partner of a Firm, agrees to share whole or some part of his profits and property with an outsider Y :
(a) X is Sub Partner
(b) Y is Sub-Partner
(c) Y is Partner of the Firm
(d) None of the above
When a partner agrees to share his profits derived from the firm with a third person, that third person is known as a Sub-Partner. Hence, option (b) is the correct answer.
22. Where a minor fails to give public notice within six months of attaining majority
(a) The partnership becomes invalid
(b) A minor shall be solely liable for all liabilities of the firm
(c) Minor automatically becomes partner on the expiry of the six months
(d) Minor automatically ceases to be a partner.
Within 6 months of attaining majority, the minor must give a public notice stating whether he will become a partner or not. Otherwise, on the expiry of such period, the minor shall be deemed to have become a partner. Hence, option (c) is the correct answer.
23. When the minor partner elects not to become a Partner, on attaining majority, his right and liabilities:
(a) Continue to be the same as they were, till the public notice is given
(b) Becomes same as that of other major Partners
(c) are as determined by a Court of Law
(d) Become ineffective since the partnership is invalid.
If a minor does not elect to become a partner on attaining majority, his rights and liabilities shall continue to be those of a minor up to the date of giving public notice. Hence, option (a) is the correct answer.
24. Liability of a Partner is
(a) Limited to the amount of capital invested by him
(b) Unlimited
(c) Limited to the extent of loan given to the Firm
(d) Limited to the amount of his share of profits.
In partnership, the liability of the partners is unlimited. Hence, option (b) is the correct answer.
25. Param and Promod, two friends, buy a Laptop computer agreeing to share the same between them. It is a
(a) Co-ownership
(b) Partnership
(c) Joint venture
(d) Hindu undivided family business.
In case of Partnership, Joint venture and HUF business, there is a business owned jointly. In this case, Param and Promod jointly own a Laptop but not any business. Hence, option (a) is the correct answer.
26. In a Joint Hindu Family, the limit of members is
(a) 40
(b) 20
(c) 50
(d) There is no such limit.
There is no maximum limit on number of coparceners of a Joint Hindu Family. Hence, option (d) is the correct answer.
27. Registrar of firms is appointed by
(a) Central Government
(b) State Government
(c) Governor of the state
(d) CAG of India.
s.57 empowers a State Government to appoint Registrars of Firms for the purposes of the Partnership Act. Hence, option (b) is the correct answer.
