Kinds of Partners in Business Partnership
Two or more persons may come together and may form a partnership. They are known as partners. Some of them may take part in the management while others may contribute capital.
Various kinds of partners in a partnership business are briefly explained as follows.
1. Active partners: The partners who take part in the management of the firm actively are called active partners or working partners.
2. Dormant or Sleeping partners: The partners, who just provide capital and do not take part in the business activities of the firm are called Dormant or Sleeping partners.
3. Limited or Special partners: The partners whose liability is limited in a firm are called Limited or Special partners.
4. Partners by Estoppel: Sometimes a person may be representing the firm to secure loans for the firm, creating a sense in the mind of the third party that he himself is a partner in the firm. He is then liable to the third parties, who gave loan to the firm. He cannot deny later that he is not a partner. Such persons are called ‘Partners by Estoppel’.
5. Partners by Holding Out: Sometimes, the firm may use the name of a person in its activities, creating a sense in the public that he is also a partner. On coming to know that his name is being misused, the person has to give a public notice that he is not a partner in the firm. Such a partner who gives a public notice is known as partner by holding out.
6. Nominal partner: A person who only lends his name to the firm and who is not really a partner is called a Nominal Partner. He does not share the profits or losses.
7. Sub-partner: When any of the partner agrees with a stranger to share the profits derived by him from the firm, the stranger is called a ‘sub-partner’. Strictly speaking he is not a partner legally.
8. Partner in profits: A person who will have a share in the profits but not in the losses of a firm will be called partner in profits. But he is equally responsible for all the debts of the firm.
9. Incoming Partner: The partner, who is admitted afresh in the firm is known as new or incoming partner. Such a partner can be admitted with the consent of all partners. The incoming partner brings his share of capital and goodwill.
10. Outgoing or Retiring partner: The partner who retires from the firm with the consent of other partners is termed as retiring partner. The outgoing partner must serve notice to the general public that he had retired from the firm. Otherwise he will be liable to third parties for the payment of their debts and dues even after his retirement.
11. Secret partner: The person, who is the partner of the firm in the real sense but keeps this fact a secret, is known as secret partner. Legally this type of partner also has unlimited liability.
12. Minor partner: A minor, who is below 18 years of age, may be admitted into a firm to the benefits of the partnership. But he cannot become a partner as he is incompetent to enter into a contract. His liability will be limited to the extent of his share. He cannot, take part in the management. He has a share in the profits of the firm. After attainment of major age limit, within six months, he has to decide whether to continue in the firm or not. He should issue a notice to that extent. Otherwise he is deemed to be a regular partner.