Why is a clear agreement necessary in a partnership business?
Answer and explanation
Correct answer: To clarify responsibilities, profit-and-loss sharing, and the decision-making process
A partnership agreement records the understanding among partners about duties, capital contributions, profit and loss sharing, authority, and decision-making. Clear terms improve transparency and provide a basis for resolving disagreements. It does not remove legal compliance or automatically give control to one partner. Hence, option A is correct.
Frequently asked questions
What is the correct answer to this question?
To clarify responsibilities, profit-and-loss sharing, and the decision-making process
Why is this the correct answer?
A partnership agreement records the understanding among partners about duties, capital contributions, profit and loss sharing, authority, and decision-making. Clear terms improve transparency and provide a basis for resolving disagreements. It does not remove legal compliance or automatically give control to one partner. Hence, option A is correct.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Forms of Business Organisation. Topic: Partnership.
