KINDS OF PARTNER

 

kinds-of-partner

Although the law recognizes only the general partners. But in practice there may be other partners as well.

A general partner is a person that is discussed in section 4 of partnership act 1932 who joins with at least one other person to form a partnership business. A general partner has responsibility for the action of the business, can legally bind the business and is personally liable for all the business debts and obligations.  General partners are the most common kind of partners in the partnership business. In Fact, whenever we discuss a person who is participating in the business of the partnership as a partner, we mean the general partner.

There are other kinds of partners as well in partnership such as nominal partner, working partner, sleeping partner, partner by estoppel, incoming partner, outgoing partner, and a minor as a partner in partnership business.

 

Nominal Partner:

By Nominal partner we mean a partner as the name tells a partner only in name. Whenever the name of a person is used in a partnership business as a partner of a firm, actually he is not a partner in the firm and he is not participating in the business of the firm; he is called a nominal partner. As he is not participating in the business, he has no right to participate in the profit of the business. But as per as the question of liability is concerned, he is fully liable for all the acts of the partner of the firms as if he was a real partner in that particular firm.

Working partner:

When two partner joins the hand in partnership business and one partner provide the finance for the business whereas the other partner provides the services to the business, the partner who is providing services to the business as known as the working partner. He may enjoy a fixed salary in the partnership business as well as a particular share in the profit of the firms. As per as has liability is concerned, he is fully liable for the action of the firm to the third parties.

Sleeping partner:

A sleeping partner is a partner who does not participate actively in the business of the firm. They have provided capital for the business but don't participate actively in the business such as a partner who retired from the firm but left their capital in the partnership business and have a share in the profits of the firm. In law they continue to be the partners of the firm because they have not provided yet any notice of their retirement to the third parties. They are fully liable to the third parties for the actions of the firm like a general partner.

Partner by holding out or Partner by Estoppel:

Section 28 of the partnership act 1932 defines the partner by holding out. By providing that anyone who by words spoken or written or by conduct represents himself or knowingly permits himself to be represented to be a partner in a firm that as if any person in any manners represents himself to be a partner in a firm. the section further states he is liable as a partner in that firm to anyone to any person who has won the fate of any such representation has given credit to the firms’ further section provided that it doesn't matter whether the person representing himself to be a partner in that firm does or does not know that the representation has reached the person so giving credit. such a person would be liable as per as particular credit concerned. Later on, he cannot say that actually he is not a partner in that firm. Such a person would be considered as a partner by holding out or by estoppel.

For Application of section 28 two conditions must be met:

i. There must be a representation by a person to be partner in the firm and

ii Debts must be given to the firm on the fate of such representation.

 

Incoming partner:

Section 31 of partnership act 1932 provides that subject to contract between the partners and to the provision of the section 30 no person should be introduced as a partner into a firm without the consent of all the existing partners. a person who is admitted as a partner into an already existing firm with the consent of all existing partners is called an incoming partner. An incoming partner is not liable for any act of the firm that as performed by the firm before has admission as a partner in that particular firm. However, if the incoming partner has specifically accepted the past liability of the firm to which he is going to join then he would be liable for the act of the firm like other partners of the firm. As this agreement to be liable for the past liability of the firm is between the partners themselves, therefore no 3rd party holds the incoming partner liable for the act of the firm before he joins the firm. Because there is no such privity of contract between the partner and the creditor of the firm.

Outgoing Partner:

Outgoing partner is a partner who is leaving the partnership firm. Section 32 of the partnership act provides that firstly, a partner may retire with the consent of all the other partners, Secondly, in accordance with an express agreement by the partners, Thirdly, where the partnership as at will by giving notice in writing to all the other partners of the firm of his intention to retire. Partner who retires from the firm does not seize to be liable for the tax and obligations of the firm incurred before his retirement. He is liable to a third party for all the transactions of the firm begin but unfinished tell the time of his retirement. The time of retirement is a time when a public notice is given of his retirement. Therefore, he will after his retirement be liable for acts of the firm tell the time of public notice in this regard given. He will not be considered liable for the act of the firm if there is an agreement between the partners and third parties.

Minor partner:

In general law a minor has no capacity to enter into a contract. However, Under section 30 of the partnership act a person who is minor according to the law to which he is subject may not be a partner in a firm but consent of all the partners for the time being he may be admitted to the benefit of the partnership. Section provides that the share of the minor partner is liable for the act of the firm but the minor is not personally liable for any action of the firm. He has the right to share the profits of the firm. as may be agreed upon among the partners under section 30 on attaining the age of majority or of his obtaining knowledge that he had been admitted to the benefit of the partnership. He has the right to either become a general partner in the firm or he may choose not to become a partner in the firm.