Unit 2: Formations of Business Organisations
### **MCQs on Sole Proprietorship:**
1. **Which form of business organisation is owned and controlled by an individual?**
(a) Partnership
(b) Joint Stock Company
(c) Sole Proprietorship
(d) Cooperative Society
**Answer:** (c) Sole Proprietorship
2. **Which of the following is an example of a business usually run as a sole proprietorship?**
(a) Large retail store
(b) Small neighbourhood stationery store
(c) Joint stock company
(d) Government organisation
**Answer:** (b) Small neighbourhood stationery store
3. **What is the liability of a sole proprietor?**
(a) Limited to the business assets
(b) Unlimited
(c) Limited to personal savings
(d) None of the above
**Answer:** (b) Unlimited
4. **What happens if the assets of a sole proprietorship business are insufficient to pay off debts?**
(a) The business is closed
(b) Personal assets of the owner are used
(c) The debt is written off
(d) The government pays the debt
**Answer:** (b) Personal assets of the owner are used
5. **Which of the following is a merit of sole proprietorship?**
(a) Unlimited resources
(b) Quick decision making
(c) High public confidence
(d) Liability is shared
**Answer:** (b) Quick decision making
---
### **MCQs on Joint Hindu Family Business:**
1. **The Joint Hindu Family business is governed by which law?**
(a) Indian Partnership Act
(b) Hindu Succession Act
(c) Companies Act
(d) Hindu Family Business Act
**Answer:** (b) Hindu Succession Act
2. **Who controls the Joint Hindu Family business?**
(a) The eldest member, called the Karta
(b) All family members equally
(c) A hired manager
(d) The Indian government
**Answer:** (a) The eldest member, called the Karta
3. **What is the liability of co-parceners in a Joint Hindu Family business?**
(a) Unlimited liability
(b) Limited to their share in the co-parcenery property
(c) No liability
(d) Limited to the assets of the business
**Answer:** (b) Limited to their share in the co-parcenery property
4. **Which act gave daughters equal rights in the Joint Hindu Family business?**
(a) Hindu Succession (Amendment) Act, 2005
(b) Indian Contract Act
(c) Indian Partnership Act
(d) Companies Act
**Answer:** (a) Hindu Succession (Amendment) Act, 2005
5. **Which of the following is a limitation of the Joint Hindu Family business?**
(a) Unlimited liability of co-parceners
(b) Dominance of the Karta
(c) Limited decision-making power
(d) No continuity in business
**Answer:** (b) Dominance of the Karta
---
### **MCQs on Partnership:**
1. **Which act governs the partnership form of business in India?**
(a) Indian Companies Act
(b) Hindu Succession Act
(c) Indian Partnership Act, 1932
(d) Contract Act, 1872
**Answer:** (c) Indian Partnership Act, 1932
2. **What is the minimum number of partners required to form a partnership firm?**
(a) One
(b) Two
(c) Three
(d) Four
**Answer:** (b) Two
3. **In a partnership, the partners’ liability is:**
(a) Limited to their investment
(b) Unlimited
(c) Shared equally, but limited
(d) Limited to business profits
**Answer:** (b) Unlimited
4. **Which of the following is a merit of partnership?**
(a) Unlimited liability
(b) Balanced decision making
(c) Lack of continuity
(d) Low public confidence
**Answer:** (b) Balanced decision making
5. **What happens if one partner in a partnership firm retires or dies?**
(a) The partnership continues as usual
(b) The partnership is dissolved
(c) The business becomes a sole proprietorship
(d) The partnership expands automatically
**Answer:** (b) The partnership is dissolved
---
### 1. Which type of partner actively participates in the management of the firm and has unlimited liability?
**a)** Sleeping partner
**b)** Secret partner
**c)** Active partner
**d)** Nominal partner
**Answer:** c) Active partner
---
### 2. A partner who does not participate in the day-to-day activities but still contributes capital is called a:
**a)** Sleeping partner
**b)** Nominal partner
**c)** Active partner
**d)** Partner by estoppel
**Answer:** a) Sleeping partner
---
### 3. What is the unique feature of a secret partner?
**a)** Limited liability
**b)** His association with the firm is unknown to the public
**c)** He does not share in profits or losses
**d)** He contributes capital but does not manage the firm
**Answer:** b) His association with the firm is unknown to the public
---
### 4. Which partner allows the use of their name by the firm but does not share in its profits or losses?
**a)** Nominal partner
**b)** Sleeping partner
**c)** Active partner
**d)** Partner by estoppel
**Answer:** a) Nominal partner
---
### 5. A person who gives the impression of being a partner through their behavior is called:
**a)** Partner by holding out
**b)** Active partner
**c)** Partner by estoppel
**d)** Nominal partner
**Answer:** c) Partner by estoppel
---
### 6. What is the liability of a minor admitted to the benefits of a partnership?
**a)** Unlimited liability
**b)** Limited to the capital contributed
**c)** No liability
**d)** Same as other active partners
**Answer:** b) Limited to the capital contributed
---
### 7. Which of the following is true for a partnership at will?
**a)** It is formed for a specific project
**b)** It continues until any partner gives notice of withdrawal
**c)** It has limited liability
**d)** It requires compulsory registration
**Answer:** b) It continues until any partner gives notice of withdrawal
---
### 8. A partnership formed for a specific time period or project is called:
**a)** Partnership at will
**b)** Particular partnership
**c)** General partnership
**d)** Limited partnership
**Answer:** b) Particular partnership
---
### 9. In a general partnership, the liability of the partners is:
**a)** Limited to the capital contributed
**b)** Unlimited and joint
**c)** Limited for some partners and unlimited for others
**d)** None of the above
**Answer:** b) Unlimited and joint
---
### 10. Which partnership type requires compulsory registration?
**a)** General partnership
**b)** Limited partnership
**c)** Partnership at will
**d)** Particular partnership
**Answer:** b) Limited partnership
---
### 11. Which of the following is not a consequence of non-registration of a partnership firm?
**a)** The firm cannot file a suit against third parties
**b)** A partner cannot file a suit against the firm
**c)** The firm can file a suit against its partners
**d)** The firm cannot file a case against the partners
**Answer:** c) The firm can file a suit against its partners
---
### 12. Which document specifies the terms and conditions of a partnership?
**a)** Memorandum of Association
**b)** Articles of Incorporation
**c)** Partnership deed
**d)** Registration certificate
**Answer:** c) Partnership deed
---
### 13. What is the primary purpose of a cooperative society?
**a)** Maximize profits for the members
**b)** Promote the economic interest of its members
**c)** Create monopolies
**d)** Provide unlimited liability protection
**Answer:** b) Promote the economic interest of its members
---
### 14. Who defines cooperative organisation as a society that promotes the economic interests of its members?
**a)** E. H. Calvert
**b)** Adam Smith
**c)** Henry Fayol
**d)** Alfred Marshall
**Answer:** a) E. H. Calvert
---
### 15. According to the Indian Partnership Act 1932, the registration of a firm:
**a)** Must be done before starting business
**b)** Is compulsory
**c)** Can be done at any time during its existence
**d)** Is only necessary for firms with limited liability
**Answer:** c) Can be done at any time during its existence
### 1. Which of the following is a key feature of a cooperative society?
a) Voluntary membership
b) Unlimited liability
c) Control by one individual
d) Absence of legal status
**Answer:** a) Voluntary membership
### 2. What is the minimum number of members required to form a cooperative society?
a) 5
b) 7
c) 10
d) 15
**Answer:** c) 10
### 3. In a cooperative society, the liability of members is:
a) Unlimited
b) Limited to the amount contributed by them
c) Dependent on the number of members
d) Determined by the government
**Answer:** b) Limited to the amount contributed by them
### 4. Which principle governs voting in a cooperative society?
a) Proportional to capital contribution
b) One vote per share
c) One member, one vote
d) Only the managing committee has voting rights
**Answer:** c) One member, one vote
### 5. Which of the following is NOT a merit of a cooperative society?
a) Equality in voting status
b) Limited liability
c) Support from the government
d) Easy access to high salaries for managers
**Answer:** d) Easy access to high salaries for managers
### 6. Which of the following is a type of cooperative society formed to help small producers market their products?
a) Consumer cooperative societies
b) Producer cooperative societies
c) Marketing cooperative societies
d) Credit cooperative societies
**Answer:** c) Marketing cooperative societies
### 7. Which type of cooperative society is formed to help people with limited income construct houses?
a) Consumer cooperative societies
b) Cooperative housing societies
c) Farmer cooperative societies
d) Credit cooperative societies
**Answer:** b) Cooperative housing societies
### 8. Amul, a famous brand, is an example of which type of cooperative society?
a) Producer's cooperative society
b) Consumer's cooperative society
c) Credit cooperative society
d) Farmer's cooperative society
**Answer:** a) Producer's cooperative society
### 9. What is the primary motive of a cooperative society?
a) Earning profit
b) Service to members
c) Expanding operations globally
d) Competing with private businesses
**Answer:** b) Service to members
### 10. Which act governs the registration of cooperative societies in India?
a) Companies Act, 1956
b) Cooperative Societies Act, 1912
c) Indian Partnership Act, 1932
d) Societies Registration Act, 1860
**Answer:** b) Cooperative Societies Act, 1912
### 1. Which of the following is a feature of a joint stock company?
- (a) Unlimited liability
- (b) Direct control of shareholders over day-to-day operations
- (c) Perpetual succession
- (d) Single ownership
**Answer:** (c) Perpetual succession
### 2. A joint stock company is referred to as an artificial person because:
- (a) It can sign its name
- (b) It exists independent of its members
- (c) It can breathe and eat
- (d) It is not created by law
**Answer:** (b) It exists independent of its members
### 3. The legal framework that governs the formation and functioning of companies in India is:
- (a) The Companies Act, 1956
- (b) The Indian Partnership Act, 1932
- (c) The Companies Act, 2013
- (d) The Contract Act, 1872
**Answer:** (c) The Companies Act, 2013
### 4. The liability of shareholders in a joint stock company is:
- (a) Unlimited
- (b) Limited to the extent of unpaid share capital
- (c) Limited to personal assets
- (d) Unlimited only in public companies
**Answer:** (b) Limited to the extent of unpaid share capital
### 5. What is the minimum number of members required to form a public company?
- (a) 2
- (b) 5
- (c) 7
- (d) 10
**Answer:** (c) 7
### 6. Which of the following types of companies cannot invite the public to subscribe to its securities?
- (a) Private company
- (b) Public company
- (c) Both private and public company
- (d) Government company
**Answer:** (a) Private company
### 7. The common seal of a company is:
- (a) Its official signature
- (b) An instrument to issue shares
- (c) A legal entity's representative
- (d) A mark for liquidation
**Answer:** (a) Its official signature
### 8. Which of the following is a limitation of a company?
- (a) Simple and quick formation
- (b) Limited liability for shareholders
- (c) Impersonal work environment
- (d) Perpetual existence
**Answer:** (c) Impersonal work environment
### 9. The term 'perpetual succession' means:
- (a) The company dissolves with the death of a shareholder
- (b) The company continues even if all its members leave or die
- (c) Shares cannot be transferred
- (d) The company is short-lived
**Answer:** (b) The company continues even if all its members leave or die
### 10. In case of a private limited company, the maximum number of members allowed is:
- (a) 7
- (b) 50
- (c) 200
- (d) 500
**Answer:** (c) 200
### 11. A public company is required to have a minimum of how many directors?
- (a) One
- (b) Two
- (c) Three
- (d) Five
**Answer:** (c) Three
### 12. The company form of business organisation is most suitable for:
- (a) Small-scale businesses
- (b) Businesses with limited capital
- (c) Large-scale businesses with greater capital requirements
- (d) Sole ownership
**Answer:** (c) Large-scale businesses with greater capital requirements
### 13. In a joint stock company, the risk of losses is:
- (a) Borne by the shareholders proportionately
- (b) Borne by the creditors
- (c) Borne only by the directors
- (d) Borne only by the government
**Answer:** (a) Borne by the shareholders proportionately
### 14. The requirement to maintain an index of members is compulsory for:
- (a) Private companies only
- (b) Public companies only
- (c) Both public and private companies
- (d) No company
**Answer:** (b) Public companies only
### 15. Which of the following is not a merit of a joint stock company?
- (a) Limited liability
- (b) Perpetual succession
- (c) Ease of formation
- (d) Professional management
**Answer:** (c) Ease of formation
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