Legal Aspects of Business Organisation Quiz

What is the nature of a sole proprietorship?

• Owned by multiple people

• Owned by one person

• Owned by a partnership

• Owned by a company

According to the Partnership Act 1961, how many partners are required to constitute a partnership?

• At least 3 partners

• At least 5 partners

• At least 2 partners

• At least 4 partners

In a partnership, who is liable for the debts of the partnership?

• Each partner is liable only for their own debts

• Each partner is not liable for any debts

• Each partner is personally liable for the debts of the partnership

• The partnership itself is liable for the debts

What is the main advantage of a partnership?

• Easy and cheap to set up

• Unlimited liability

• Limited membership

• Mandatory reporting requirements

What is the effect of incorporation of a company under Section 16 (5)?

• The company has perpetual succession

• The company ceases to exist

• The company becomes a partnership

• The company becomes a sole proprietorship

When can a company be held liable for its debts and obligations?

• Only when the members agree to it

• When the company is a subsidiary

• When the members are personally responsible

• The company is always liable

What is an exception to Salomon's Principle of separate legal entity for a company?

• Taxation rules

• Fraudulent trading

• Publication of name

• Evasion of legal obligations

In a partnership, who can be held liable for debts incurred by one partner?

• The sleeping partner

• Only the partner who incurred the debt

• The managing partner

• All partners collectively

What is the main disadvantage of a partnership?

• Unlimited liability

• Limited membership

• Easy to set up

• No mandatory reporting

What is the primary reason for appointing directors in a company?

• To limit liability

• To dissolve the company

• To separate management and ownership

• To participate in management