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Active, Sleeping partner &  partners of different types

Active, Sleeping partner & partners of different types

In partnership businesses we find different types partners viz. active( managing) partners, sleeping (dormant)partner, nominal or ostensible partner, sub-partner, partner by estoppel or holding out, partners in profits only, minor as a partner, others. The different kinds of Partners that we may normally notice in Partnership Firms are as under.

Active Partner: An active partner is the capital investor in the partnership who actively involves himself in the daily operation of the partnership. The active partner participates in the management meeting and discusses with the other partners on business review and the action plan of the business for the ensuing period.

Sleeping Partner: A sleeping partner is a person who provides capital to the business and shares profit and loss as per the partnership agreement. However, he/she neither involves himself/herself in the business activity nor attends the management meeting of the firm.

Nominal  Partner: When a well-known personality in the society who lends his name as a partner of the firm for the purpose of offering creditability and recognition to the firm, such person is called as a nominal partner or ostensible partner or limited partner. The nominal partner does not share in the profit, he will be paid fees for lending his name as a partner.

Sub-partner: Sub-partner is a partner’s partner. He shares the profit from such partner but no way related to the partnership business to which his partner is a partner. The sub-partner does not have any right over the partnership and he is not liable for debts of the firm.

Partner in Profit: When a person joins the partnership with a condition that he shares only the profit and not liable for losses, he is called a partner in profit. The partner in profit does not join in while business decision taken by the other partner but he is liable to third parties for all the debts of the firm.

Presumptive partner: A person who is not the real partner of a firm but gives an impression to outside world that he is a partner of the firm either by his conduct or words, then he is known as a partner by estoppel. Similarly, a person who represented or who has knowingly remains silent when others declare him as a partner of the firm by words or conduct is treated by the law as a partner by holding out. The partner by estoppel or a partner by holding out is liable to those parties who gave credit to the firm and suffer losses due to misrepresentation of such person (sec 28).

Minor as a partner: A minor cannot be admitted as a partner in a firm. Sec 30(1) provides that a contract with minor is void ab-initio because a minor (who is below the legal age of 18), is considered as lacking the legal competence to enter into a valid contract. However, with the consent of all the partners, for the time being, minor may be admitted to the benefits of partnership.

Related articles:

Legal rights of minor as a partner
Different Partnership models in business
Legal aspects of partnership business
Sharing of capital deficiency by the partners (Garner V/s. Murray rule)


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