Types of Partners in a Business Partnership
Table of Contents
Types of Partners in a Business Partnership
Partners are of different kinds in a business partnership. They are as working partner, sleeping partner, nominal partner, partner by estoppel, limited partner, secret partner, partner by holding out, sub-partner, partner in profit. They are briefly explained below.
1. Working Partner
A Working Partner is one who contributes capital to the business and takes active part in its management. Hence, he is called active partner.
2. Sleeping Partner
A Sleeping Partner is one who contributes only capital to the business, but does not take part in its management. He is also called dormant partner or financing partner.
3. Nominal Partner
A Nominal Partner does not contribute capital. Neither does he take active part in the management. His contribution in a partnership is limited to allowing the other partners to make use of his name.
4. Partner by Estoppel
Partner by Estoppel is not a partner of the firm but by his words and conduct he leads the outsiders to believe that he is also a partner of the firm. Usually this arises, when the outgoing partner fails to give notice about his retirement.
5. Limited Partner
In foreign countries like U.K., the law of the land permits the admission of partners with limited liability. But in India, no one can be a limited partner. There is only one exception. The liability of a minor admitted for the benefits of partnership is limited to the extent of his capital contribution.
6. Secret Partner
A Secret Partner is actually a partner of the firm. But he does not hold out to the public as a partner of the firm but keeps his existence as secret. His liability is also unlimited.
7. Partner by Holding Out
Though a Partner by Holding Out is not a partner, he knowingly permits himself to be a partner of the firm by his activities.
8. Sub – Partner
A Sub-Partner has no direct contact with the firm. He is only next to a partner.
9. Partner in Profit
A Partner in Profit becomes a partner whenever the firm earns profit. His liability is also unlimited.
