State PCS

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Interview Questions from Partnership

Ans:- 1. There must be an agreement. 2.  There must be an organization to carry on business. 3.  The intention of the partnership..
What is a test of Partnership?


1. There must be an agreement.

2.  There must be an organization to carry on business.

3.  The intention of the partner must be to share the profits of the business.

4.  The business is to be claimed on by all or any of them acting for all.

Q.What is the difference between Partnership & HUF?

Ans. The difference between them in terms of interest is the interest of a partner in the business is determined by a contract whereas the interest in HUF business is decided by the status.

On the death of the partner, the partnership dissolved. Though on the death of a member of a HUF does not have any effect on business at all. On the death of a member of HUF, his interest is automatically inherited by others.

Q. What is the difference between Partnership & Company?

Ans. The registration of a partnership concern is not compulsory.

The minimum number of persons in a partnership firm is two and the maximum is ten in the case of banking and insurance business and it is twenty in other business.

The minimum number of persons in a Pvt. Ltd. Company is two and the maximum is fifty.

A partnership concern can be dissolved easily. No formalities are required for the winding up of a partnership firm.

A Pvt. Company is wound up only through court. If the court is satisfied that there is a reasonable ground for winding up the company only then it is wound up.

Q. What is the difference between Partnership &Co-ownership?

Ans. The possession of property by more than one person is called co-ownership. In this co-ownership, there is only a combined ownership without any business purpose.

Partnership always arises out of contract.

The limit of a maximum number of persons in partnership is 20 though this limit in terms of co-ownership is no limit.

Q. How a partner may retire?

Ans. Under section 32 of the Partnership Act a partner may retire

1.With the consent of all the other partners and accordance with an express agreement by the partners.

3.Where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.

Q. Have you heard of the case Cox Vs. Hickman? Which court delivered this judgment & what was t   ratio decidendi of this case?

Ans. The judgment in the case of Cox v. Hickman is delivered by the House of Lords.

If the person carrying on the business acts not only for himself but for others also, so that they stand in the position of principle and agents, they are partners. This is the main theme of the case of Cox v. Hickman.

Q.  Who is a dormant partner?

Ans. Contributor and investor who is not active in the management of the firm and may not be known to outsiders. A dormant partner shares profits and losses with other partners but generally may without notice to the lenders.

The principle of holding out is not applied in the case of dormant partner.

Q. What is implied authority & which section deals with it? When restriction on im- plied authority can be invoked against a third party?

Ans. The doctrine of implied authority has been enshrined in Sec 18 and Sec 19 of the Partnership Act. If there is no express agreement, the act of a partner which is done to carry on business in usual way the such of the kind of business which carried on by the firm binds the firm. This is called implied authority.

If a partner is prohibited from doing an act that would otherwise be within the scope of his implied authority. It is said that the implied authority of a partner has been restricted.

These restrictions are effective against a third person.

Q. Can a minor be a partner? If yes, when? How his rights& liability is different from another partner?

Ans. A minor is not capable to contract of partnership. So, a minor is not able to become a partner. Though under section 30 of the Partnership Act. A minor may be admitted to the benefit of the firm.

If a minor becomes a partner his rights and liabilities shall be similar to those of a full-fledged partner. Minor has the right to receive his agreed share of the property and profits of the firm. Minor’s share in the property and profits is liable for the acts of the firm.

On attaining majority, he has to decide within six months whether he shall remain in the firm or leave it.

Q. What are the different modes of dissolution of partnership?

Ans. The dissolution of a partnership between all the partners of a firm is called the dissolution of the firm.

A firm may be dissolved in the following modes.

1.Dissolution by consent- A firm may be dis- solved with the consent of all the partners or in accordance with a contract between partners.

2.A firm may be dissolved in accordance with a contract between the partners.

3.If all partners of the firm have been adjudicated as insolvents.

4.If the business of a firm is illegal from the very beginning.

5.If the firm is constituted for a fixed period by the expiry of that period.

6.By the death of a partner.

7.By the adjudication of a partner insolvent.

8.If the duration of the partnership is not fixed then it may be dissolved at any time by any partner giving notice.

9.If one of the partners had become a person of unsound mind, then the court may dissolute the firm.

10.If any partner becomes permanently incapable of performing his duties as a partner then the court may dissolute the firm.

11.If a partner is guilty of conduct which is likely to affect prejudicially the business of the firm then the court may dissolute the firm.

Q. What is the difference between a dissolution of a firm and a dissolution of a partnership?

Ans. Dissolution of partnership means termination of the existing partnership agreement and the formation of a new agreement.

The dissolution of a partnership firm means that the firm is closing down its business.

Q. Generally for implied authority, a difference is made between trading & non trading firm. Why it is so?

Ans. A trading firm is a firm that connects buyers and sellers within the same or different countries but does not get involved in owning or storing merchandise.

Facebook become a trading company.

Q. Which provision of C.P.C. deals with suit by or against a firm/partnership firm?

Ans. Order 30 CPC.

Read also: Locational Factors Influencing Food Processing Industries

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