Types of Partners in Business Partnership

Partnership : Introduction : Meaning 

Indian partnership act defines partnership as “Partnership is the relation between persons who have agreed to share the profit and loss of business carried on by all or any of them acting for all.”

A partnership is a form of business in which two or more but  not more than twenty people own a business, it is based on a written contract or on an oral agreement.

Partnership is the relation between a person who has agreed to share the profit 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 individual ‘partner’ and collectively a ‘firm’.

Some important point : Related to partnership

•  Partnership deed – It contains all terms of the agreement. It is also known as articles of partnership
•  Sacrifice ratio = old ratio – new ratio.
• Goodwill = good name, a reputation earned by hard work & honesty
•  Gaining ratio = new ratio- old ratio.
•  When a partner retire or dies then we calculate gaining ratio.
•  On the admission of a partner we calculate sacrifice ratio.
•  Dissolution of partnership means that the firm closes down its     business and comes to an end.
• On dissolution assets of the firm are sold and liabilities are paid off and out of the remaining amount, the accounts of partners are settled.
• Realization a/c is opened for disposing of all the assets of the firm & making payment to all the creditors.
• Revaluation a/c is prepared at the time of admission, death, and retirement.
• Realization a/c is prepared at the time of dissolution of a company.

Types of Partners

1. Sleeping or dormant partner : 

The sleeping partners who are not actively taking part in the management and administrative activity of the business.

2. Active partner :

The active partner those partners who actively  take part in the management and administrative activity of the business.

3. Limited partner : 

A limited partner is a partner whose liability is limited to the amount that he paid to the business.

4. Nominal partner : 

A nominal partner is a person who has permitted others to the belief that he is partner. he does not invest capital but he gives a chance of using “GOODWILL” of him.

5. Quasi partner : 

A quasi partner is a partner who  has withdrawal his capital but keep it as a loan to the business. He will get interest on his loan.

6. Partner by estoppel : 

partner by estoppels is not a partner of the firm but his words and conduct he leads the outsiders to believe that he is also a partner of the firm. Usually this arises, when the outgoing partner fails to give  notice about his retirement.

7. Partner in profit only : 

Is one who gets a share of the profits and does not share losses. He is liable to outsiders. He does not take part in the management of the business.

8. Limited partner : 

in foreign countries like the U.S. the law of the land permits the admission of partners with limited liability. But in India, no one can be a limited partner. There is only one exception. The liability of a minor admitted for the benefits of partnership is limited to the extent of his capital contribution.

9. Secret partner : 

A secret partner is actually  a partner of the firm. But he does not hold out to the public as a partner of the firm but keeps his existence as secret. His liability is also unlimited.

10. Sub- partner :  

Is one who gets a share of profits of the firm from one of the partners. A sub-partner has no rights against the firm and he is not liable for its debts.

11.Incoming partner : 

Incoming partner is one who  is newly admitted to the firm, is not liable for the debts and obligations of the firm incurred before his joining the firm unless he so agrees.