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Types of Partners

Partnership firms may have following kinds of partners:

1.    Active or Actual Partners. Partners who take an active part in the conduct of the partnership business are called “actual” or “ostensible” partners. They are full fledged partners in the real sense of the term. Such a partner must give public notice of his retirement form the firm in order to free himself form liability for acts of the firm after his retirement.

2.    Sleeping or Dormant Partners. Sometimes, there are persons who merely put in their capital (or even without capital they may become partners) and do not take active part in the conduct of the partnership business. The are known as ‘sleeping’ or ‘dormant’ partners. They do share profits and losses (usually less than proportionately), have a voice in management, but their relationship with the firm is not disclosed to the general public. They are liable to the their parties for all acts of the firm just like an undisclosed principal.

3.    Silent Partners. Those who by agreement with other partners have no voice in the management of the partnership business are called ‘silent’ partners. They share profits and losses and are fully liable for the debts of the firm.

4.    Partner in Profits Only. A partner who has stipulated with other partners that he will be entitled to a certain share of profits without being liable for the losses, is known as ‘partner in profits only’. As a rule, such a partner has no voice in the management of the business. However, his liability vis-à-vis third parties will be unlimited because in India we cannot have limited partnership.

5.    Sub- Partner. When a partner agrees to share his share of profits in a partnership firm with an outsider, such an outsider is called a sub-partner. A sub-partner has no rights against the firm nor he is liable for the debts of the firm.

6.    Partner by Estopped or Holding Out. If a person represents to the outside would by words spoken or written or by his conduct or by lending his name, that he is a partner in a certain partnership firm, he is then estopped form denying his being a partner. He is liable as a partner in that firm to any one who has on the faith of such representation grated credit to the firm. Actually such a person is not partner in that firm (no agreement, no sharing in profits and losses, no say in the management, may not be knowing exact place of business). But as he fold himself out to be a partner, he becomes responsible to outsiders as a partner on the principle of estoppel or holding out. It is for this reason that such a person is called a ‘partner by estoppel’ or ‘partner by holding out’. He may also be called a ‘quasi partner’ for he is not partner in the full implications of the term. Only in the eyes of outside is not a partner in the full implications of the term. Only in the eyes of outside world, he is considered a partner. He may also be called a ‘nominal partner’.

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