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CS Professional · CSR and Social Governance · Partnership Firms

Ramesh, Suresh and Mahesh agree to run a sweet shop in Jaipur. Ramesh alone manages the shop and acts for all three, and they agree to share the profits equally. Which statement is correct?

They are partners. The Act defines partnership as an agreement to share profits of a business carried on by all or any of them acting for all. Ramesh managing the shop on behalf of all three satisfies this, and registration or joint management is not required.

  1. AThere is no partnership because only Ramesh carries on the business
  2. BThey are partners, since they agreed to share profits of a business carried on by any of them acting for allCorrect
  3. CThey are partners only if the agreement is registered
  4. DThey are partners only if all three manage the shop daily

Explanation

Under Section 4, partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Ramesh acts for all, so the requirement is met. Registration and daily management by all are not part of the definition.

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