Types of Partners -
1. Active or Working Partner : Active partner is a partner who not only contributes capital but also takes active part in the day to day management of the business. His liability is unlimited.
2. Sleeping or Dormant Partner : A sleeping or dormant is also referred to as inactive partner. He only contributes capital and does not take active part in the day to day management of the firm. He shares the profits/losses of the firm. His liability is unlimited.
3. Secret Partner : Such a type of partner contributes capital and takes active part in the management of the firm’s business. However, his relation with the firm is not known to the outside world. He shares the profits/losses of the firm and has unlimited liability.
4. Limited Partner : The liability of such a partner is limited to the extent of his share in the capital and profits of the firm. He is not entitled to take active part in the management of the firm’s business. The firm does not get dissolved in the event of his death, lunacy or bankruptcy.
5. Partner in Profits Only : He only shares the profits but not the losses of the firm. His liability is unlimited and he does not participate in the management of the firm.
Also Read: Partnership-Meaning, Features, Merits and Demerits
6. Nominal or Ostensible Partner : Such a partner only lends his name and reputation for the benefit of the firm. He does not contribute any capital nor does he take part in the management of business. He does not share the profits/losses of the firm. . He represents himself or ‘knowingly allows himself to be represented as a partner of the firm. He becomes liable to outsiders for the debts of the firm. A nominal partner can be of two types.
(a) Partner by Estoppel : He is a person who by his words (spoken or written) or conduct represents himself as a partner. Such a partner becomes liable to those who advance money to the firm under the impression that he is a partner in the firm.
Suppose Mr. X, is not a partner but he tells Mr.Y that he is a partner in a firm called ABC Enterprises. Under this impression, Mr.Y sells goods worth Rs. 10,000 to the firm. Later on the firm is unable to pay the amount to Mr. Y. In this case, Mr.Y can recover the amount from Mr.X. Here, Mr.X is a partner by estoppel.
(b) Partner by Holding Out : When a person is declared as a partner but he does not deny this fact even after becomming aware of it, he becomes liable to third parties who lend money or credit to the firm on the basis of such a declaration. Such a partner is called as Partner by Holding out.
Suppose, Mr.X tells Mr.Y in the presence of Mr.Z that Mr.Z is a partner in his partnership firm. Mr. Z does not deny it. Later on Mr.Y gives a loan to the firm (where Mr.X is a partner) on the basis of the belief that Mr.Z is a partner in the firm. If the firm fails to repay the loan to Mr.Y then in such a case Mr.Z becomes liable to pay the loan amount to Mr.Y. Here, Mr.Z is a partner by holding out.
7. Minor Partner : A minor is a person who has not completed 18 years of age. A minor is not qualified to enter into a contract and hence can not become a partner. But he may be admitted as a partner to the benifits of partnership with the mutual consent of all the partners. Consent of all the partners is a must. A minor partner is entitled to a share in the profits of the firm. He can inspect the books of account of the firm. However, he cannot actively participate in the management of firm. His liability is limited only to the extent of his share in the capital and profits of the firm.
After becoming a major, the minor must give a public notice within six months if he wants to discontinue as a partner with the partnership firm. If he does not give any such notice within six months or if he decides to remain as a partner in the firm, his liability becomes unlimited. He can also take an active part in the management of the partnership business.
8. Sub-Partner : A partner may include anybody in his share of the firm. Such a person who shares a partner’s profits is called a sub-partner. He does not have any direct relationship with the partnership firm. His relation is restricted only to the partner, who includes him, in his own share of the firm. The subpartner is not liable for the debts of the firm.
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