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CMA Intermediate · Business Laws and Ethics · Indian Partnership Act, 1932

Kapoor & Sons is a business run by Mr. Kapoor, as karta, together with his sons, all members of a Hindu undivided family, who carry on the family business as such. Which statement is correct under the Indian Partnership Act, 1932?

They are not partners in that business. Section 5 says partnership arises from contract and not from status, and members of a Hindu undivided family carrying on the family business as such are not partners in it, even though they share its profits.

  1. AThey are partners because they share the profits of the business
  2. BThey are partners only if the business is registered with the Registrar
  3. CThey are not partners in that business, as partnership arises from contract and not from statusCorrect
  4. DThey are partners at will by virtue of their family status

Explanation

Section 5 provides that partnership arises from contract and not from status, and that members of a Hindu undivided family carrying on a family business as such are not partners in it. Sharing profits by status does not create partnership.

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