Types of Partners in the Partnership firm under the Partnership Act.

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(1) introduction:

In a partnership, two and more people join together with the business idea, and they agree to share the profit and loss from the firm business. As per the understanding of partners, and the nature of partnership business, various kinds of partners can be divided.

There is not always happen that a partner of partnership firm commonly joins an as same purpose or common intention to share equally profit, loss, and liability of the firm business.

That may be differences between the partners on the basis or nature of the business. As well various types of partners can join the partnership venture.

The nature or concept of business can be different, and according to that, the partners can categorize into various types of partners in the partnership firm.

In this article, we understand the various types of partners under the partnership act.

 (2) The definition of partner and partnership firm:

The partnership act 1932, section 4 definite the definition of partnership, partner. According to that definition of “partnership”, “partner”, “firm” and “firm name”.—’’Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into a partnership with one another are called individually “partners” and collectively a “firm”, and the name under which their business is carried on is called the “firm name”.[1].

(3)  Types of partners: 

According to the nature of business and understandings between the partners, the following kind of partners can categorize on regular basis. After all, one thing is the note that there is no restricted any type of partnership as per the desire of partners in the partnership act.

(1) Active or managing partner:

As per the name of an active or managing partner, this type of partner takes an active part in the firm business. And run the business of the firm in day-to-day activities. 

Such type of partner is a part of the management of the firm business, he runs daily business activities on behalf of all or others partners. As well, his act is defined as an agent of others partner.

He may conduct different activities as a manager, advisor, and in some cases as a hole controller of the firm business. The active partner plays a significant role in the firm.

That’s the reason when he wants to retire from the firm must give public notice about his retirement, because he has done all act on behalf of other partners. By this, he can absolve himself of all liabilities that are acted upon by other partners.

If he does not issue such notice of his retirement, he shall be liable for all acts and liabilities done by other partners after his retirement.

(2) Nominal partner:

A nominal partner is a kind of partner that has no real interest in the firm. He does not invest capital, and he does not share the profit of the firm business.

The aim of the firm to involves such a type of partner to get more credibility in the market. Through this type of partner, the firm can easily compete with the market competition and get more sales.

Such a type of partner just leads his name to the firm. However, he can not escapes his liabilities of the firm. He will be liable to the third parties for the act which he or any other partners do.

(3) Sleeping partner or dormant partner:

This type of partner does not play an active part in the firm business and does not participate in running the business. Although he has invested money, but not invest his time and efforts in the firm. That’s the reason he becomes a sleeping or dormant partner.

He is enabled to share a profit and loss of the firm like other partners. There is a mandatory requirement for him o release a public notice if he wants to retire from the firm.

(4) Partner by estoppel: 

A partner by estoppel means a partner who is not a partner, but he behaves by the act, words, or conduct like a partner. Such a partner is held out through representation that he is a partner, even he is not a legal partner.

This type of partner enables the firm to gain more credit and financial benefits he is also liable for that act because of his performance as a partner of the firm.

Here two conditions must be required to establishing that concept first one is that, a person must represent him as a partner by action, conduct, words, or written as a partner of the firm. And second is third parties must prove that they have known him as a partner by his representation.

(5) Partner in profit:

A person who becomes a partner of the firm to share a profit part is only called a partner in profit. This type of partner is liable for a third party but only for the profit part. His liability would not count in the losses of the firm business.

Generally, such a type of partner joins as a partner for investing capital. As well as create goodwill that makes more efficiency to growing of the firm business. This type of partner does not take any active part in the management of the firm.

(6) Minor partner:

We can say that the minor means a person who has not to attend the Age of majority as per the eye of law that called minor. As we refer to the Indian majority act 1875 Section 3, which clearly says that a person Who attends 18 years of age, that called a major in the law.

According, to the provision of the Indian Partnership Act, There is no restriction to add a minor as a partner to the firm. However, we should note that he can be added as a partner for the beneficiary only. Adding him as a  partner in the firm consent of all partners is required for that.

When we refer to the provision of the Indian contract act 1872 according to section 11 of the act which clearly says that a contract that is made by a minor is not valid in the law as well such a contract would be treated as a void agreement.

However, according to the provision of the Indian partnership act 1932, the provision of section 30 which is clearly said that a minor can be admitted as a partner of the partnership firm for the beneficiary purpose with the consent of all other partners is required for that. 

It means the liability of a minor partner is limited to his share of the firm. Any other private property of a minor cannot be attached by the creditor in the cases of loss of the firm.

Here one thing we should note that when a minor attend the age of majority, within a six month he needs to decide that want to continue become a partner of the firm or want to retire? these circumstances he needs to desire his declaration by published public notice.

(7) Secret partner: 

A secret partner means who keeps his membership as a partner, but keeps it secret for the outsiders. We can say that the role of such type of partner is a member between the active and sleeping partner in the firm.

He can play an active part in the running businesses of the firm. If we talk about his part of liabilities in the firm is also unlimited like other active partners, because he also shares the profit and losses of the firm business.

(8) Incoming Partner:

An incoming partner means a person who enters into the partnership firm as a partner, which already exists. The main thing we should know that a new partner will come into a partnership firm with the consent of all other partners of the firm. 

A new partner who enters as a partner in an existing firm does not liable for the creditors or any liabilities of the firm done before he joined as a partner.  

(9) Outgoing partner:

There is no bar for the partners of the partnership to leave or get retirement from the firm without dissolving that. If a partner wants to reties from the firm he can leave it. Such a type of partner is known as an outgoing partner.

A partner who wants to retire from the firm must release a press note, by publishing a public notice he has to state his intention about retirement from the firm before taking his retirement. 

Thus, his liabilities and debt will be accrued only before his retirement. However, it will continue if he fails to release a public notice which is mandatory for him.

(10) Sub-partner:

This type of partner directly not involved with the partnership firm. Means sub-partner is that type of partner who is associated with anyone else in his share in the partnership firm. Though he is not involved in the firm so he does not create any relationship with the firm, but he creates a relationship between him and a partner.

As a sub-partner, he can not present himself as a partner of the firm, as well he has not any legal right to the partnership firm. That’s why he is not liable for the debts or liabilities of the firm. However, he can claim his part of the share, which is agreed with a partner of the firm as per his contract him as a sub-partner.

(4) Conclusion:

The nature or concept of business can be different, and according to that, the partners can categorize into various types of partners in the partnership firm.

Reference:  

(1) The partnership act 1932, section 4.

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