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Questions and Answers
What is a primary concern when admitting a new partner to a partnership?
What is a primary concern when admitting a new partner to a partnership?
- A new partner automatically increases the firm's market value.
- Existing partners must engage in lengthy legal processes.
- The new partner will always bring additional capital.
- The profit sharing ratio of existing partners may be affected. (correct)
What does the term 'unlimited liability' imply in a partnership?
What does the term 'unlimited liability' imply in a partnership?
- Liability is limited to the amount invested in the partnership.
- Partners' private property is protected from creditor claims.
- Partners are only liable for their capital contributions.
- Partners are fully responsible for debts affecting the firm, including personal assets. (correct)
What is a risk associated with implied authority in a partnership business?
What is a risk associated with implied authority in a partnership business?
- Partners may lack autonomy in decision-making.
- One partner may act without the consent of others, harming the firm. (correct)
- Partners are guaranteed financial security when taking loans.
- All decisions must be made unanimously by partners.
What issue might arise from the lack of business secrecy in a partnership?
What issue might arise from the lack of business secrecy in a partnership?
What is the first step an entrepreneur must take when starting a small scale business?
What is the first step an entrepreneur must take when starting a small scale business?
Which of the following represents a physical resource necessary for a small scale business?
Which of the following represents a physical resource necessary for a small scale business?
What is a crucial element after installing machinery in a small scale business?
What is a crucial element after installing machinery in a small scale business?
What aspect does periodic monitoring and evaluation impact in a small scale business?
What aspect does periodic monitoring and evaluation impact in a small scale business?
Why is marketing considered an important activity in small scale business?
Why is marketing considered an important activity in small scale business?
What should an entrepreneur determine regarding power supply for their business?
What should an entrepreneur determine regarding power supply for their business?
What is emphasized as a simpler process than setting up large scale businesses?
What is emphasized as a simpler process than setting up large scale businesses?
What is not a part of the initial arrangement of resources in a small scale business?
What is not a part of the initial arrangement of resources in a small scale business?
Which factor can lead to a higher share in profit for active partners in a partnership?
Which factor can lead to a higher share in profit for active partners in a partnership?
What is the primary reason for goodwill in a partnership business?
What is the primary reason for goodwill in a partnership business?
What happens to a partnership if there is no provision for continuity in the agreement during a partner's death?
What happens to a partnership if there is no provision for continuity in the agreement during a partner's death?
What is a significant drawback of a partnership in terms of legal status?
What is a significant drawback of a partnership in terms of legal status?
What common issue can arise from the involvement of multiple individuals in a partnership?
What common issue can arise from the involvement of multiple individuals in a partnership?
Which of the following limitations is imposed by the Indian Partnership Act?
Which of the following limitations is imposed by the Indian Partnership Act?
Which statement best describes the non-transferability of interest in a partnership?
Which statement best describes the non-transferability of interest in a partnership?
What type of efficiency can specialization among partners bring to a partnership business?
What type of efficiency can specialization among partners bring to a partnership business?
What is the primary criterion used to differentiate small businesses from large and medium scale businesses?
What is the primary criterion used to differentiate small businesses from large and medium scale businesses?
According to the MSMED, what is the capital investment limit for a manufacturing unit to be classified as 'Micro'?
According to the MSMED, what is the capital investment limit for a manufacturing unit to be classified as 'Micro'?
What is the maximum capital investment allowed for a 'Small' service sector business according to MSMED?
What is the maximum capital investment allowed for a 'Small' service sector business according to MSMED?
Which of the following statements is true about Small Scale Industries in developing countries?
Which of the following statements is true about Small Scale Industries in developing countries?
What is the investment limit for an industrial unit to be categorized as a Small Scale Industry according to the MSMED?
What is the investment limit for an industrial unit to be categorized as a Small Scale Industry according to the MSMED?
How are Small Scale Industries classified by the Government of India?
How are Small Scale Industries classified by the Government of India?
Which sector is NOT classified under Small Scale Industries according to MSMED?
Which sector is NOT classified under Small Scale Industries according to MSMED?
What employee strength characterizes the manufacturing sector for those using power under Small Scale Industries?
What employee strength characterizes the manufacturing sector for those using power under Small Scale Industries?
What is meant by 'Partnership at will'?
What is meant by 'Partnership at will'?
Which type of partnership requires a specific time period for its existence?
Which type of partnership requires a specific time period for its existence?
How many Designated Partners are required in a Limited Liability Partnership?
How many Designated Partners are required in a Limited Liability Partnership?
What unique feature does a Limited Liability Partnership provide to its partners?
What unique feature does a Limited Liability Partnership provide to its partners?
According to the Mitakshara school of thought, who can inherit the family business?
According to the Mitakshara school of thought, who can inherit the family business?
What happens to a partnership for a particular venture after its objective is achieved?
What happens to a partnership for a particular venture after its objective is achieved?
What is a characteristic of a Joint Hindu Family Business?
What is a characteristic of a Joint Hindu Family Business?
Which partnership type is specifically formed for a defined project or business activity?
Which partnership type is specifically formed for a defined project or business activity?
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Study Notes
Small Scale Industries
- Small scale industries are those in which manufacturing, services, and production are done on a small or micro scale.
- The government of India has classified businesses as micro, small, and medium based on the investment limit.
- The investment limit for the manufacturing sector is different than for services sector.
Small Scale Industries Investment Limits
- Micro
- Manufacturing: Does not exceed ` 25 lakhs
- Services: Does not exceed ` 10 lakhs
- Small
- Manufacturing: More than
25 lakhs but does not exceed5 crores - Services: More than
10 lakhs but does not exceed2 crores
- Manufacturing: More than
- Medium
- Manufacturing: More than
5 crores but does not exceed10 crores - Services: More than
2 crores but does not exceed5 crores
- Manufacturing: More than
Partnership Business
- Goodwill: Established partnership businesses typically have goodwill based on their quality of service, customer relations, and ethical practices.
- Specialization: Different partners may have different skillsets, leading to specialization in the business, improving overall efficiency.
Demerits of Partnership Business
- Problem of Continuity: One partner's death, insolvency, or insanity can lead to dissolution of the partnership unless the partnership agreement details a continuation plan.
- Absence of Legal Status: A partnership is not legally separate from its partners; the partners and firm are considered the same in the eyes of the law.
- Disputes: As multiple partners are involved, there is a risk of disputes arising, which can ultimately lead to the firm's dissolution.
- Non-Transferability of Interest: Partners cannot transfer their shares to outsiders without the consent of all partners.
- Limited Number of Partners: According to the Indian Partnership Act, a partnership cannot have more than 50 partners.
- Difficulty in Admission of a Partner: Admitting a new partner can affect the profit sharing ratio of the existing partners leading to difficulty in admission.
- Unlimited Liability: Partners' personal assets can be seized to cover debts if the firm's assets are insufficient.
- Risk of Implied Authority: Partners can take actions without the consent of other partners, potentially putting the firm at risk.
- Limited Capital: The limited number of partners restricts the capital-raising capacity of the business.
- Problem of Secrecy: Confidential information can be leaked by partners to competitors or third parties.
Types of Partners
- Partnership at Will: Partners can leave the partnership at any time.
- Partnership for a Particular Period: Partnership dissolves at the end of a specific time period.
- Partnership for a Particular Venture: Partnership is formed for a specific project or business, and dissolves upon completion.
Joint Hindu Family Business (JHFB)
- A unique form of business originating in India. Known as 'Hindu Undivided Family Business' (HUF) or, Joint Hindu Family Firm (JHFF).
- Mitakshara School of Thought: According to this school of thought under Hindu law, only male members of the family can inherit the family business.
- Inheritance: Under the Mitakshara school, sons, grandsons, and great grandsons become joint owners, with each son gaining equal rights to the ancestral property, including the right to split it.
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