A partnership firm can have different types of partners with different roles and liabilities. It is important to know about the different types of partners for a clear understanding of their rights and responsibilities. Let us take a look at different types of partners.
1. Active or working partner: An active partner is the one who contributes capital and also takes an active part in the management of the firm. He bears unlimited liability for the firm’s debts. Active partners take actual part in carrying out the business of the firm on behalf of other partners.
2. Sleeping or dormant partner: Partners who just contribute the capital and do not take part in the day to day activities of the business are called sleeping Partners. He shares in the profits or losses of the firm. His liability for the firm’s debt is unlimited.
3. Limited partner: The liability of a limited partner is limited to the extent of his share in the capital and profits of the firm. He is not entitled to take an active part in the management of the firm’s business.
4. Secret Partner: A secret partner is the one whose association with the firm is not known to the outside world. Other than this one feature all the other aspects are as it is like other partners. He contributes the capital and takes an active part in the management of the firm’s business. He shares in the profits and losses of the firm and his liability is unlimited.
5. Partner in Profits only: He shares in the profits of the firm but not in the losses, but his liability for the firm’s debts is unlimited. He is not allowed to take part in the management of the firm.
6. Nominal or ostensible or quasi partner: These partners neither contribute capital nor take part in the management of the business. He does not share in the profits or losses of the firm but is liable to third parties for the debts of the firm. He only lends his name and reputation for the benefit of the firm. A nominal partner can be of two types:
A) Partner by estoppel: A person who by his words (spoken or written) or by his conduct represents himself as a partner becomes liable to those who advance money to the firm on the basis of such representation. He can not avoid the consequences of his previous act.
Suppose Meera, who is not a partner but tells her friend Naaz that she is a partner in a firm named Aadil Enterprises. On this impression, Naaz sells goods worth Rs 30,000 to the firm. Later on, the firm is unable to pay the amount. In that case, Naaz can recover the amount from Meera. Here, Meera is a partner by estoppel.
B) Partner by holding out: When a person is declared as a partner and he does not deny this even after becoming aware of it, he becomes liable to third parties who lent money or credit to the firm on the basis of such a declaration.
Suppose, Aadil tells Naaz in the presence of Meera that Meera is a partner in the firm of Aadil Enterprises and Meera does not deny it. Later on, Naaz gives a loan of Rs 50,000 to Aadil Enterprises on the basis of the impression that Meera is a partner in the firm. The firm fails to repay the loan to Naaz. Meera is liable to Naaz. Here, Meera is a partner by holding out.
7. Minor as a partner: A minor is a person who has completed 18 yrs. of age. A minor cannot become a partner because he is not qualified to enter into a contract, but he may be admitted to the benefits of a partnership with the mutual consent of all the partners. He cannot take an active part in the firm’s management. His liability is limited to the extent of his share in the capital and profits of the firm. He cannot file a suit against the firm or its partners to get his share except when he wants to disassociate himself from the firm.
After becoming a major, the minor must give public notice within six months if he wants to break off his connections with the partnership firm. If he does not give any notice within six months or if he decides to remain in the firm, he becomes liable to the unlimited liability of the firm from the date he was admitted to the benefits of a partnership. He also becomes entitled to take an active part in the management of the firm’s business.
8. Sub partner: Sub partner is a third person with whom a partner agrees to share his profits desired from the firm. He does not take any part in the management of the firm and he is also not liable for the firm’s debts.