Small Scale Industries Investment Limits
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Questions and Answers

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?

  • 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?

  • 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?

    <p>Confidential business information may be shared with competitors.</p> Signup and view all the answers

    What is the first step an entrepreneur must take when starting a small scale business?

    <p>Obtain the prescribed application form from District Industries Centre</p> Signup and view all the answers

    Which of the following represents a physical resource necessary for a small scale business?

    <p>Production methods</p> Signup and view all the answers

    What is a crucial element after installing machinery in a small scale business?

    <p>Identifying manpower needs</p> Signup and view all the answers

    What aspect does periodic monitoring and evaluation impact in a small scale business?

    <p>Production quality and profitability</p> Signup and view all the answers

    Why is marketing considered an important activity in small scale business?

    <p>To gain exposure for the business</p> Signup and view all the answers

    What should an entrepreneur determine regarding power supply for their business?

    <p>The total power requirement</p> Signup and view all the answers

    What is emphasized as a simpler process than setting up large scale businesses?

    <p>Setting up small scale businesses</p> Signup and view all the answers

    What is not a part of the initial arrangement of resources in a small scale business?

    <p>Preparing a business marketing plan</p> Signup and view all the answers

    Which factor can lead to a higher share in profit for active partners in a partnership?

    <p>Provisions in the partnership agreement</p> Signup and view all the answers

    What is the primary reason for goodwill in a partnership business?

    <p>Quality service and ethical conduct</p> Signup and view all the answers

    What happens to a partnership if there is no provision for continuity in the agreement during a partner's death?

    <p>The business is liable for dissolution</p> Signup and view all the answers

    What is a significant drawback of a partnership in terms of legal status?

    <p>The law does not distinguish between partners and the firm</p> Signup and view all the answers

    What common issue can arise from the involvement of multiple individuals in a partnership?

    <p>Disputes among partners</p> Signup and view all the answers

    Which of the following limitations is imposed by the Indian Partnership Act?

    <p>Maximum number of partners cannot exceed fifty</p> Signup and view all the answers

    Which statement best describes the non-transferability of interest in a partnership?

    <p>Transfers require consent from all partners</p> Signup and view all the answers

    What type of efficiency can specialization among partners bring to a partnership business?

    <p>Increased efficiency</p> Signup and view all the answers

    What is the primary criterion used to differentiate small businesses from large and medium scale businesses?

    <p>Capital investment in plant and machinery</p> Signup and view all the answers

    According to the MSMED, what is the capital investment limit for a manufacturing unit to be classified as 'Micro'?

    <p>Does not exceed ` 25 lakhs</p> Signup and view all the answers

    What is the maximum capital investment allowed for a 'Small' service sector business according to MSMED?

    <p>More than <code>10 lakhs but not exceeding</code> 2 crores</p> Signup and view all the answers

    Which of the following statements is true about Small Scale Industries in developing countries?

    <p>They are characterized by low capital availability and high manpower.</p> Signup and view all the answers

    What is the investment limit for an industrial unit to be categorized as a Small Scale Industry according to the MSMED?

    <p>Not exceeding one crore</p> Signup and view all the answers

    How are Small Scale Industries classified by the Government of India?

    <p>According to capital investment limits</p> Signup and view all the answers

    Which sector is NOT classified under Small Scale Industries according to MSMED?

    <p>Retail sector</p> Signup and view all the answers

    What employee strength characterizes the manufacturing sector for those using power under Small Scale Industries?

    <p>Less than 50 employees</p> Signup and view all the answers

    What is meant by 'Partnership at will'?

    <p>A partnership without a specified duration which can be terminated at any time by any partner.</p> Signup and view all the answers

    Which type of partnership requires a specific time period for its existence?

    <p>Partnership for Particular Period</p> Signup and view all the answers

    How many Designated Partners are required in a Limited Liability Partnership?

    <p>At least two, with one being a resident of India</p> Signup and view all the answers

    What unique feature does a Limited Liability Partnership provide to its partners?

    <p>Personal liability protection against the wrongful acts of other partners</p> Signup and view all the answers

    According to the Mitakshara school of thought, who can inherit the family business?

    <p>Only male members of the family</p> Signup and view all the answers

    What happens to a partnership for a particular venture after its objective is achieved?

    <p>It is dissolved after the completion of the venture.</p> Signup and view all the answers

    What is a characteristic of a Joint Hindu Family Business?

    <p>It allows only male descendants to have ownership rights.</p> Signup and view all the answers

    Which partnership type is specifically formed for a defined project or business activity?

    <p>Partnership for Particular Venture</p> Signup and view all the answers

    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 exceed 5 crores
      • Services: More than 10 lakhs but does not exceed 2 crores
    • Medium
      • Manufacturing: More than 5 crores but does not exceed 10 crores
      • Services: More than 2 crores but does not exceed 5 crores

    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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    Related Documents

    OCM Chapter 3 & 4 PDF

    Description

    This quiz explores the classification of small scale industries in India, focusing on the investment limits for micro, small, and medium enterprises. Understand the distinctions between manufacturing and service sectors and the role of goodwill in partnership businesses.

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