Question

A & B entered into an agreement to carry on a business of manufacturing and selling toys. Each one of them contributed Rs.35 lakhs as their capital with a condition that A & B will share the profits equally, but the loss, if any is to be borne by A alone. Referring to the provisions of the Indian Partnership Act,1932 decide whether there exists a partnership between A and B.

• A. There is no partnership between A and B
• B. A is sub-partner of B
• C. There is partnership by holding out
• D. There is partnership between A and B, B is partner in profit only.

Answer 1

The correct option is D There is partnership between A and B, B is partner in profit only.

Partnership are of various types like there is a case when amongst the two partners only one of them is liable for all profit & losses, the other one remains as a silent partner.

Both partners A & B though contribute 35 lakhs towards capital but only A is liable for profit & losses but B acts as a silent partner. Such provisions are mentioned in the Indian Partnership act of 1932 that a single partner can also run a business.