Kinds of Partners
The following are the kinds of partners according to liability, participation in
management, shares of profits and etc
Active partner
A partner who takes an active part in the management of the firm is called an
active partner. He takes much interest in the affairs of the firm. Such a partner
must give public notice of is retirement from the firm in order to free himself
from liability. He is also called working partner.
Sleeping partner
One who does not take an active part in the management of the firm is called
sleeping partner or dormant partner. Such partner brings only capital in the
business. He is also liable to the creditors of the firm like other partners. He is not
required to serve public notice before retirement.
Nominal partner
One who lends his name and reputation to the firm is called nominal partner.
He does not invest in business. He does not take part in the management like other
partners. He does not get share in profits. But he is regarded as a partner in the
eye of law. He is liable to the outsiders for the debts of the firm.
Senior Partner
A partner who has a more investment in the firm, and receives more profit is
called senior partner. He due to experience, age, capacity and other skill plays a
major role in the management of the business.
Junior partner
A junior is just the opposite of the senior partner. Normally he is a young man
with less investment. Due to small investment and less experience he receives a
nominal share in the profit.
Partner in profits only
He is such a partner who shares the profits of the firm but is not liable for the
losses. A sleeping partner may be a partner in profits only. He is equally liable to
the outsiders like other partners.
Minor Partner
A minor is a person who has not completed 18 years of age. To form a partnership
there must be an agreement among the partner and the person who wants to enter
into partnership must be competent to contract. As a minor is not competent to
contract, so he cannot become a partner, But with the consent of all the partners
he may be admitted to the benefits of partnership by an agreement with his
guardian.
Secret Partner
He is a partner whose membership is kept secret from outsiders. He takes an
active part in the management of the firm. He is liable for debts of the firm like
other partners.
Rights of Partners
Subject to contract between partners, the Partnership Act provides the following rights,
duties and liabilities of partnership.
1. Right to Share Profits
Every partner has a right to share equally in the profits earned by the firm,
irrespective of his amount of capital contribution
2. Right to interest on capital
A partner is not entitled to receive interest on the capital contributed by
him.
3. Right to interest on advances
A partner is entitled to receive 6% interest on any loan made by him to the
partnership, unless it is agreed that no such interest would allowed
4. Right to take part in Management
Every partner has a right to take part in the conduct of this business.
5. Right to be indemnified
The partnership must indemnify every partner in respect of payment made
by him and personal liabilities incurred by him in the conduct of the
business
6. Right to inspect Books
Every partner has a right to check the books of accounts of the firm and to
get the copies.
7. Right to admit and expel partner
A new partner cannot be admitted in the firm and an old partner cannot be
expelled from the firm without the prior consent of all the partners.
8. Right to give opinion
Nature of the partnership business cannot be altered without the prior
approval of all the partners.
9. Right to collect Debt
A partner has an implied right to collect partnership debts and to give
receipts for payment.
10. Right to act as Agent
Every partner can act as an agent on behalf of the remaining partners and
bind the other partners to his act.
11. Right to be consulted
Every partner has a right to be consulted and heard before and matter is
decided.
Duties of Partner
Following are the duties of the partners.
1. Duty to work diligently
Every partner must use his knowledge and skill for the benefit of the firm. He
must conduct the business with the best of his ability and secure maximum
benefits for the firm.
2. Duty to be just and faithful
Every partner must be just and faithful to his co-partners. He must observe utmost
good faith and fairness towards other partners of the firm.
3. Duty to render accounts
Every partner must render true and proper accounts to his co-partners. It means
that each partner must be ready to explain the accounts of the firm and produce
vouchers in support of the entries.
4. Duty to provide information
Every partner must give full information about the firm to his co-partner. A
partner being an agent of other partners, must not conceal any information
concerning the firm from other partners.
5. Duty to indemnify
If the firm suffers any loss due to willful negligence or fraud by any partner, the
partner concerned must compensate the firm and other partners.
6. Duty not to make secret profit
A partner should not make any secret profit by way of commission. If he does so,
he will have to return it to the firm.
7. Duty not to use firms’ property
A partner must not employ the firm’s property for his personal use or benefit.
8. Duty not to start another business
A partner should not without the consent of his co-partners engage in any
business, wither openly or secretly, which compete the partnership business.
9. Duty to act within authority
Every partner must act within his authority given to him
