Question

Identify which of the following statement is true and which is false.
(i) As relations of partners inter se are that of agency, no consideration is required to create the partnership.
(ii) Partnership and Joint Hindu Family both are created by status.
(iii) There is no restriction as to maximum number of members for HUF.
(iv) Registration is also required for HUF.
Select the correct answer from the options given below -

• A. (i) - True, (ii) - False, (iii) - True, (iv) - False
• B. (i) - False, (ii) - True, (iii) - False, (iv) - True
• C. (i) - True, (ii) - False, (iii) - False, (iv) - True
• D. (i) - False, (ii) - True, (iii) - True, (iv) - False

Answer 1

The correct option is A (i) - True, (ii) - False, (iii) - True, (iv) - False

• In a partnership, the partners are liable for their partnership as happens in an agent-principal relationship which makes the characteristics of a partnership like that of an agency. As in agency, there no essential need of a consideration, partnership also does not require consideration for its creation.
  
• A partnership arises out of a contract, whereas a joint Hindu family business arises by the operation of law and is not the result of a contract but as a result of a status.
  
• There is no limit to the number of persons who can compose a HUF nor to their remoteness from the common ancestor and to their relationship with one another.
• Once an HUF is formed it must be formally registered in its name. An HUF should have a legal deed. The deed shall contain details of HUF members and the business of the HUF. A PAN number and a bank account should be opened in the name of the HUF.