Commercial Applications
Arun and Amrita agree to start a business together by pooling their resources and sharing profits. What type of business structure are they forming?
- Sole Proprietorship
- Partnership
- Joint Stock Company
- Cooperative Society
Answer
Partnership
Reason — Partnership is a voluntary association of two or more persons who agree to carry on some business jointly by pooling their resources (capital and managerial skills) and share its profits and losses. Since Arun and Amrita are two persons agreeing to pool resources and share profits, they are forming a partnership.
Related Questions
Statement I: Every partner has unlimited liability in LLP.
Statement II: Every partner has limited liability in General Partnership.
- Only I is correct
- Only II is correct
- Both I and II are correct
- Both I and II are wrong
Which of the following is not correct about Limited Liability Partnership (LLP)?
- An LLP is a body corporate having a separate legal entity and perpetual succession.
- An LLP must not maintain annual accounts reflecting the true and fair view of its state of affairs.
- The liability of partners in LLP is limited to their agreed contributions to the LLP.
- As there is no limit on the number, an LLP can raise huge funds for expansion and growth of business.
A partnership firm cannot sue a third party in a court of law unless:
- It has a minimum of three partners.
- It is registered with the Registrar of Firms.
- It operates in more than one state.
- It has a partnership deed.
Aman and Rohan started a business as partners. They verbally agreed to share profits equally but did not create a written agreement. Later, they had a dispute about profit sharing. What could have prevented this dispute?
- Registering the firm
- A written partnership deed
- Seeking legal advice before starting
- Limiting the number of partners