MCQ on Indian Partnership Act 1932

Here is the continuation of the 100 multiple-choice questions on the Indian Partnership Act, 1932:

54. A partner who does not contribute capital but shares profits is called:
    a) Sleeping partner
    b) Nominal partner
    c) Partner by estoppel
    d) Limited partner
    Answer: b) Nominal partner
    Explanation: A nominal partner allows their name to be used but does not contribute capital or take part in the business.
55. The term “good faith” in a partnership means:
    a) Sharing profits equally
    b) Honest disclosure of all material facts
    c) Following the majority partner’s decision
    d) Taking permission for every act
    Answer: b) Honest disclosure of all material facts
    Explanation: Good faith implies partners act honestly and disclose all relevant facts affecting the firm.
56. A partner who retires from the firm can demand:
    a) A share in the firm’s goodwill
    b) Equal profits for life
    c) Control over decision-making
    d) To rejoin the firm at any time
    Answer: a) A share in the firm’s goodwill
    Explanation: A retiring partner is entitled to their share in the goodwill of the firm.
57. The authority of a partner to bind the firm is called:
    a) Implied authority
    b) Express authority
    c) Unlimited liability
    d) None of the above
    Answer: a) Implied authority
    Explanation: Implied authority enables a partner to bind the firm for acts done in the ordinary course of business.
58. What happens if a partnership firm is not registered?
    a) It is declared illegal
    b) It cannot file a suit against third parties
    c) It can operate without any restrictions
    d) Partners are not personally liable
    Answer: b) It cannot file a suit against third parties
    Explanation: Section 69 prohibits unregistered firms from suing third parties to enforce rights.
59. The retirement of a partner leads to:
    a) Dissolution of the firm
    b) Reconstitution of the firm
    c) Conversion into LLP
    d) Expulsion of all partners
    Answer: b) Reconstitution of the firm
    Explanation: Retirement results in the reconstitution of the partnership, not dissolution.
60. A firm is said to be dissolved when:
    a) All partners leave the firm
    b) Business activities come to an end
    c) The partnership deed is destroyed
    d) All partners agree to register the firm
    Answer: b) Business activities come to an end
    Explanation: Dissolution occurs when the firm ceases to carry on its business.
61. The property of the firm is distributed among partners:
    a) As per the partnership deed
    b) According to seniority
    c) Equally, irrespective of capital contribution
    d) As decided by the government
    Answer: a) As per the partnership deed
    Explanation: The distribution of property follows the terms of the partnership deed.
62. The doctrine of “holding out” applies when:
    a) A person acts as a partner without being one
    b) A partner holds excessive shares
    c) The firm withholds profits
    d) Partners do not agree on a matter
    Answer: a) A person acts as a partner without being one
    Explanation: The doctrine holds such a person liable to third parties.
63. A minor becomes a full partner when:
    a) He reaches the age of 18
    b) He chooses to become a partner after attaining majority
    c) The court orders it
    d) The other partners agree
    Answer: b) He chooses to become a partner after attaining majority
    Explanation: A minor must declare his intent to continue or withdraw within six months of attaining majority.
64. Under Section 44, the court may dissolve a firm on the ground of:
    a) Expiry of partnership term
    b) Breach of trust by a partner
    c) Voluntary consent of partners
    d) Non-registration of the firm
    Answer: b) Breach of trust by a partner
    Explanation: The court can dissolve a firm if a partner is found guilty of breach of trust.
65. A partnership ends automatically when:
    a) One partner dies
    b) One partner becomes insolvent
    c) The business becomes illegal
    d) Any of the above
    Answer: d) Any of the above
    Explanation: Death, insolvency, or illegality of business leads to automatic dissolution.
66. Which of the following is NOT an act of good faith?
    a) Disclosing profits made in competing business
    b) Concealing personal transactions
    c) Honest disclosure of material facts
    d) Acting in the interest of the firm
    Answer: b) Concealing personal transactions
    Explanation: Concealing personal transactions violates the principle of good faith.
67. In a partnership firm, the liability of the partners is:
    a) Limited to capital contribution
    b) Limited for some partners only
    c) Joint and several
    d) Equal irrespective of their shares
    Answer: c) Joint and several
    Explanation: Partners have unlimited, joint, and several liability for the firm’s obligations.
68. Which section deals with the rights of outgoing partners?
    a) Section 31
    b) Section 32
    c) Section 36
    d) Section 45
    Answer: c) Section 36
    Explanation: Section 36 defines the rights of outgoing partners, such as claiming goodwill.
69. The Indian Partnership Act, 1932 does NOT apply to:
    a) LLPs
    b) Registered partnerships
    c) Firms with more than 10 partners in banking
    d) Firms in non-banking sectors
    Answer: a) LLPs
    Explanation: LLPs are governed by the Limited Liability Partnership Act, 2008.
70. Who has the ultimate authority to settle disputes among partners?
    a) The senior partner
    b) The managing partner
    c) The court
    d) The registrar
    Answer: c) The court
    Explanation: Disputes that cannot be resolved internally are settled by the court.