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Question
In order that persons may become partners, it is essential that -.
I . There must be at least two persons
II. There must be a relationship arising out of status between two or more persons
III. The agreement must be to share the profits of a business
Select the correct answer from the options given below -
In order that persons may become partners, it is essential that -.
I . There must be at least two persons
II. There must be a relationship arising out of status between two or more persons
III. The agreement must be to share the profits of a business
Select the correct answer from the options given below -
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Solution
The correct option is D I & III only
Since partnership is the result of a contract, at least two people are necessary to constitute a partnership. The Indian Partnership Act, 1932 does not mention anything about the maximum number of partners in a partnership firm but as per the Companies Act, a partnership consisting of more than 10 persons for a banking business and more than 20 persons for any other business would be considered as illegal. Hence, these should be regarded as the maximum limits to the number of partners in a partnership firm.
The sharing of profits is one of the essential elements of a partnership. The profit sharing ratio or the manner of sharing profits is not important. But one partner cannot be entitled to the entire profits of the firm.Hence, D is the correct option.
Since partnership is the result of a contract, at least two people are necessary to constitute a partnership. The Indian Partnership Act, 1932 does not mention anything about the maximum number of partners in a partnership firm but as per the Companies Act, a partnership consisting of more than 10 persons for a banking business and more than 20 persons for any other business would be considered as illegal. Hence, these should be regarded as the maximum limits to the number of partners in a partnership firm.
The sharing of profits is one of the essential elements of a partnership. The profit sharing ratio or the manner of sharing profits is not important. But one partner cannot be entitled to the entire profits of the firm.
Hence, D is the correct option.
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