Commercial Applications
Two friends, Ajay and Sameer, jointly own a property but do not run a business with it. Can this arrangement be considered a partnership?
- Yes, because they jointly own a property
- No, because they are not running a business
- Yes, if they share the rental income equally
- No, because partnership must involve more than two people
Answer
No, because they are not running a business
Reason — A partnership can be formed only for the purpose of carrying on a business. An association of persons who jointly own a house or property without carrying on a business is not a partnership. Since Ajay and Sameer are not running any business with their property, this arrangement cannot be considered a partnership.
Related Questions
A company required funding for expansion but did not want unlimited liability for its partners. What type of partnership would best suit their needs?
- General Partnership
- Partnership at Will
- Limited Liability Partnership (LLP)
- Particular Partnership
In a partnership at will, any partner can dissolve the firm by giving notice to the other partners.
- True
- False
Assertion (A): In a Limited Liability Partnership (LLP), the liability of the partners is limited to their agreed contribution.
Reasoning (R): An LLP is a hybrid form of business organisation combining features of a partnership and a joint-stock company.
- Both A and R are true, and R is the correct explanation of A.
- Both A and R are true, but R is not the correct explanation of A.
- A is true, but R is false.
- A is false, but R is true.
A client sues a partnership firm for not delivering goods on time. The court orders all partners to pay compensation using their personal assets. What feature of partnership leads to this situation?
- Unlimited liability
- Mutual agency
- Sharing of profits and losses
- Restriction on transfer of interest