What is a Partnership in Business?
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Questions and Answers

What is required to form a partnership?

  • Two or more people (correct)
  • A written agreement
  • A business plan
  • One person

    • What best describes mutual agency in a partnership?

  • Each partner acts on behalf of the partnership (correct)
  • Partners have limited authority
  • Only the managing partner makes decisions
  • Each partner acts independently

    • Which of the following characterizes the liability of partners in a partnership?

  • Limited liability
  • Liability is nonexistent
  • Shared liability only for profits
  • Unlimited liability (correct)

    • What is the significance of having a written partnership agreement?

    <p>It helps to avoid misunderstandings</p> Signup and view all the answers

    What does the term 'firm name' refer to in the context of a partnership?

    <p>The name the business operates under</p> Signup and view all the answers

    What type of business activities can form a partnership?

    <p>Running a business for profit</p> Signup and view all the answers

    Which Act governs partnerships in India?

    <p>Indian Partnership Act 1932</p> Signup and view all the answers

    Which of the following is NOT a key feature of a partnership?

    <p>Written agreement only</p> Signup and view all the answers

    What is a crucial element for something to be considered a partnership?

    <p>Performing business activities together</p> Signup and view all the answers

    What could happen to a partner's personal assets in case of business debts?

    <p>They might be used to settle debts</p> Signup and view all the answers

    Study Notes

    What is a Partnership?

    • A partnership is formed when two or more people decide to start and run a business together.
    • Partners share the profits and losses that the business makes.

    Key Features of a Partnership

    • A partnership requires at least two people, with a maximum of 50 in India.
    • A partnership is based on an agreement, which can be written or verbal, outlining how the business will be run, profit sharing, and other important details.
    • The agreement must be about running a business, not just owning assets together.
    • Mutual agency allows each partner to act on behalf of the whole partnership, making business deals binding on all partners.
    • Partners must agree to share both profits and losses of the business.

    Liability of Partners

    • Each partner is fully responsible for the debts of the partnership, which means their personal assets can be used to pay off business debts if the business can't afford to.
    • This is known as unlimited liability.

    Additional Notes

    • A partnership is not seen as a separate legal "person" from the partners themselves, unlike a company.
    • The name under which the business operates is called the firm's name.
    • In India, the Indian Partnership Act 1932 governs how partnerships work, especially in cases of disagreements or unclear areas in the partners' agreement.

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    Description

    A quiz on the definition and key features of a partnership, including the number of people required, agreement, and profit/loss sharing.

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