Question

Answer in brief.

State any four types of partners.

Answer 1

The different types of partners are:

1. Active or Working Partners: In practice one or two partners take an active part in the Management such partners are called active or working partners. They contribute capital, share profits or losses, and have unlimited, joint, and several liabilities. They take an active interest in the day-to-day working of the firm. These partners are also known as ordinary/general/actual partners.
2. Dormant or Sleeping Partners: A dormant or sleeping partner is one who contributes capital to the firm. He does not take any active part in the management of the firm. He shares the profits and losses of the firm like any other partner. He voluntarily surrenders the right to management. However, he is liable for the debts of the firm.
3. Nominal Partners: A nominal partner is one who does not contribute any capital to the firm. He lends his name to the firm. He is simply obliging his friends by allowing the firm to use his name as a partner. He may or may not be given any share in the profits of the firm. His goodwill is used to attract business. However, he is liable for the debts of the firm.
4. Minor as Partner: According to the Indian Contract Act 1872, a person below 18 years is called a minor. But according to the Indian Partnership Act 1932, a minor can be admitted for the benefit of the firm with the consent of all other partners. He has a right to inspect the books of accounts. Minor partner has limited liability and is not liable for losses. He has the option to continue as a full-fledged partner or discontinue as a partner on attaining the age of majority. If he wishes to discontinue, he must give public notice within 6 months from the age of majority.
5. Partner in Profits only: A partner may clearly state that he Will have a share only in the profits of the firm and that he will not share losses. Such a partner is known as “Partner in Profits Only”. He has no rights to management. He may not take active participation in the management of the firm.