Types of Partners
The partners of a firm are broadly divided into three main categories.
(1) General Partners.
(2) Special Partners.
(3) Other Partners.
(1) General Partners
Basically all the partners of a firm are general partners. General partners we those whose liability is unlimited in the f General partners are of two types (a) Active partner, and (b) Sleeping partner.
(a) Active Partner
A partner who takes active part in the day to day management of the business is cared an active partner. An active partner (also called working partner) may work in different capacities such as manager, organizer, adviser, controller of all the affairs of the firm. The active partner is rewarded as per agreement between the partners.
(b) Sleeping Partner
A sleeping partner is one who contributes capital, shares profits and losses of the firm but takes no part in the day to day management of the affairs of the firm. A person, who has money to invest but cannot spare time for the business, may become sleeping partner. A sleeping partner is liable for the liabilities of the business like other partners.
(2) Special Partners
Special partners are partners whose liability is limited to the extent of their capital contributed in the firm. They are only found in limited partnership. The special partners cannot take part in the management of the business of the firm. In Pakistan limited partnership is not recognized.
(3) Other Partners
The other types of partners sometimes found in a firm are as follows.
(a) Secret Partner
A partner who takes active part in the affairs of a business but is not known to the public as a partner is called Secret partner”. He, like other partners, is liable to the creditors of the firm to an unlimited extent He shares profits according to the agreement signed.
(b) Nominal Partner
nominal partner lends his name for the goodwill and credit worthiness to the firm. He neither contributes capital nor takes active part in the management of business. Such partners are called nominal partners. Nominal partners are liable for the debts of the firm.
(c) Minor Partner
Partnership is a contract and a contract with minor is void. Under Section 30 of Partnership Act, a minor is not able to enter into a contract and so he cannot become a partner of a firm. He can, however be admitted to the benefits of a firm with the consent of other members and that too n a business which is already operating. His liability remains limited to the extent of his share in the capital. On attaining majority, he has to choose whether he has to continue as a partner or not.
(d) Partner at Will
type of partner will continue so long the partners have mutual faith, trust and confidence among them.
(e) Partners In Profit Only
If a partner is entitled to receive certain share of profit and is not held liable for the losses, he is known as partner in profit only. He is not allowed to take part in the management of the business.
(f) Partner by Estoppel
There is another minor type of partner which is called partner by estoppel. If person styles the character of a partner in a business before a third party (outsiders) by words or in writing or by his act, he is called a partner by estoppel. The third party mistaking him as a partner in the business advances loans on his creditability, that person would be personally responsible for the liability attaching to the position of a partner The partner by estoppel would, however, not be entitled to any right like other partners in the business. For example Mr. Hamid is a rich man and is not a partner in a firm named Three Star Carpets. Mr. Hamid makes a false statement to Mr. Rauf, that he is a partner of the firm Three Star Carpets. On this impression Mr. Rauf sells carpets worth Rs. One million to “Three Star Carpets” on credit. The firm is not able to pay the amount of Rs, one million. Mr. Rauf can recover the amount of Rs. One million from Mr. Hamid, Mr. Hamid here is a partner by Estoppel.
The partners of a firm are broadly divided into three main categories.
(1) General Partners.
(2) Special Partners.
(3) Other Partners.
(1) General Partners
Basically all the partners of a firm are general partners. General partners we those whose liability is unlimited in the f General partners are of two types (a) Active partner, and (b) Sleeping partner.
(a) Active Partner
A partner who takes active part in the day to day management of the business is cared an active partner. An active partner (also called working partner) may work in different capacities such as manager, organizer, adviser, controller of all the affairs of the firm. The active partner is rewarded as per agreement between the partners.
(b) Sleeping Partner
A sleeping partner is one who contributes capital, shares profits and losses of the firm but takes no part in the day to day management of the affairs of the firm. A person, who has money to invest but cannot spare time for the business, may become sleeping partner. A sleeping partner is liable for the liabilities of the business like other partners.
(2) Special Partners
Special partners are partners whose liability is limited to the extent of their capital contributed in the firm. They are only found in limited partnership. The special partners cannot take part in the management of the business of the firm. In Pakistan limited partnership is not recognized.
(3) Other Partners
The other types of partners sometimes found in a firm are as follows.
(a) Secret Partner
A partner who takes active part in the affairs of a business but is not known to the public as a partner is called Secret partner”. He, like other partners, is liable to the creditors of the firm to an unlimited extent He shares profits according to the agreement signed.
(b) Nominal Partner
nominal partner lends his name for the goodwill and credit worthiness to the firm. He neither contributes capital nor takes active part in the management of business. Such partners are called nominal partners. Nominal partners are liable for the debts of the firm.
(c) Minor Partner
Partnership is a contract and a contract with minor is void. Under Section 30 of Partnership Act, a minor is not able to enter into a contract and so he cannot become a partner of a firm. He can, however be admitted to the benefits of a firm with the consent of other members and that too n a business which is already operating. His liability remains limited to the extent of his share in the capital. On attaining majority, he has to choose whether he has to continue as a partner or not.
(d) Partner at Will
type of partner will continue so long the partners have mutual faith, trust and confidence among them.
(e) Partners In Profit Only
If a partner is entitled to receive certain share of profit and is not held liable for the losses, he is known as partner in profit only. He is not allowed to take part in the management of the business.
(f) Partner by Estoppel
There is another minor type of partner which is called partner by estoppel. If person styles the character of a partner in a business before a third party (outsiders) by words or in writing or by his act, he is called a partner by estoppel. The third party mistaking him as a partner in the business advances loans on his creditability, that person would be personally responsible for the liability attaching to the position of a partner The partner by estoppel would, however, not be entitled to any right like other partners in the business. For example Mr. Hamid is a rich man and is not a partner in a firm named Three Star Carpets. Mr. Hamid makes a false statement to Mr. Rauf, that he is a partner of the firm Three Star Carpets. On this impression Mr. Rauf sells carpets worth Rs. One million to “Three Star Carpets” on credit. The firm is not able to pay the amount of Rs, one million. Mr. Rauf can recover the amount of Rs. One million from Mr. Hamid, Mr. Hamid here is a partner by Estoppel.
