Types of Partners

Not every partner plays the same role in a firm. The commonly recognised types are:

• Active (or Working) partner — contributes capital, takes an active part in the day-to-day conduct of the business, and shares in profits and losses; his liability to third parties is unlimited.
• Sleeping (or Dormant) partner — contributes capital and shares in the profits and losses like any other partner, but does not take part in the day-to-day management of the business. His liability to outsiders remains just as unlimited as an active partner's — staying out of management does not reduce his liability.
• Nominal partner — lends only his name and reputation to the firm; he neither contributes capital nor takes part in management, and usually has no real share in profits (though he may be paid a fixed sum for the use of his name). Even so, he is liable to third parties exactly like any other partner, because outsiders dealing with the firm are entitled to rely on his name being associated with it.
• Partner in profits only — a partner who, by agreement among the partners, shares only in the profits of the firm and not in its losses. This arrangement binds the partners among themselves, but it does not protect him from liability to outside third parties, who can still hold him fully liable for the firm's debts.
• Minor admitted to the benefits of partnership — since a minor cannot enter into a valid contract, he cannot become a full partner. However, with the consent of all the existing partners, a minor may be admitted to the benefits of an already-existing partnership (Section 30 of the Act). He is entitled to his agreed share of the profits, and his liability for the firm's losses is limited only to the extent of his share in the firm's property — he can never be made personally liable beyond that. On attaining majority, he must, within six months, publicly elect whether to become a full partner or to sever all connection with the firm. …