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CS Professional · CSR and Social Governance · Partnership Firms

The Sharma family, a Hindu undivided family led by its karta, carries on a textile business as a family business. The karta's brothers and sons help in the business. Are the members partners in a firm?

No. Partnership arises from contract and not from status, and the Act expressly says members of a Hindu undivided family carrying on a family business as such are not partners. Their relation is based on family status, not on a partnership agreement.

  1. AYes, because they share the profits of the business
  2. BYes, because the business is carried on by several persons
  3. CNo, because members of an HUF carrying on a family business as such are not partnersCorrect
  4. DNo, but only if the HUF has not registered the business

Explanation

Partnership arises from contract and not from status. The Act states that members of an HUF carrying on a family business as such are not partners in that business. Sharing profits by family status does not create a partnership, and registration is irrelevant.

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