Which among the following is NOT true about the Partnership?
Which among the following is NOT true about the Partnership?
Solution
Looking at each statement about partnership:
Option 1 states that partners have joint and several liability for acts of the firm. This is true as per the Indian Partnership Act, 1932. Every partner is liable along with other partners for all firm obligations.
Option 2 describes partnership as an agreement between persons to do business and share profits/losses. This is true and aligns with Section 4 of the Partnership Act which defines partnership as a relation between persons who agree to share profits of a business.
Option 3 states that joining hands for charitable activity can be termed as partnership. This is NOT true because:
- Partnership must be formed to carry on a business
- Business means activities undertaken with a profit motive
- Charitable activities have no profit motive
- Therefore, charitable activities cannot form the basis of a partnership
Option 4 states minimum partners required is two. This is true - at least two persons are needed to form a partnership.
The essential elements of partnership include:
- Agreement between persons
- Business activity (not charitable)
- Profit sharing motive
- Mutual agency
Since charitable activities lack the profit motive and business element, they cannot constitute a partnership under the Partnership Act.
The correct answer is Option 3.