Business and Commerce MCQ Questions and Solutions with Explanations | Commerce

According to section 464(1) of the Companies Act,2013, no association or partnership consisting of more than such number of persons as may be prescribed shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or partnership or by the individual members thereof, unless it is registered as a company under this Act or is formed under any other law for the time being in force: Provided that the number of persons which may be prescribed under this sub-section shall not exceed one hundred. Further, the Companies (Miscellaneous) Rules, 2014, provides that no association or partnership shall be formed, consisting of more than 50 persons for the purpose of carrying on any business that has for its objects the acquisition of gain by the association or partnership or by individual members thereof, unless it is registered as a company under the Act or is formed under any other law for the time being in force.

Simply, The new Companies Act 2013 has prescribed the maximum number of members in case of a partnership firm should not be more than 100 in case of partnerships. As per the previous Companies Act 1956, the maximum limit in case of partnerships was 10 and 20 for banking business and other businesses respectively. So now as per Companies Act 2013 there is no such limitation specific to banking business but overall limitation laid down in 50 as per Companies Rule 2014.

The partnership is an agreement between two or more persons who decided to do business and share its profits and losses. To have a legal relationship between the partners, the partnership agreement becomes the basis. The agreement can be in written form or oral form. An oral agreement is equally valid.

Partners of typical partnership firms have unlimited liability towards their collective debts and legal consequences.

A partner in a firm cannot transfer his share to an outsider. A partner of a firm cannot transfer his interest in the firm to an outsider and make the transferee apartner without the consent of all the others. A shareholder of a company can transfer his shares and the transferee can become a member of the company.

A manager with a share in the profits is only a servant of the firm.

A nominal partner is a partner in the business who has no actual interest in the trade or its profits. However, the person allows his/her name to be used in the business. A nominal partner holds himself/herself out to the world as having an apparent interest in the business. A nominal partner will be liable as a partner, because of the false appearance the person holds before the world.

The minimum number of members in a private limited company is 2.

A Joint stock company is governed by Companies Act 2013. A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders.

Memorandum of association of a firm contains rules regarding the constitution and activities of the company. Memorandum of Association (MOA) is a legal document which specifies the scope of business activities of the company and information about shareholding of the company. The MoA is a document prepared for the Company registration procedure.

The liability of shareholders of a public company is limited to the paid up value of shares. "Limited by shares" means that the liability of the shareholders to creditors of the company is limited to the capital originally invested, i.e. the paid up value of the shares and any premium paid in return for the issue of the shares by the company.