Types of partnership

The types of partnership are as below:

Active Partner: Active partner is also named as a working partner. He takes active part in the management and running of the business. He also invests in the partnership business.

Sleeping Partner: Sleeping partner is one who:

  • Invest in the business.
  • Shares gains and losses of the business.
  • Does not participate in the conduct and management of the business.
  • Is known to the public as partner.
  • Is liable to firm’s creditors.

Silent Partner: Silent partner is one who:

  • Is known to the public as partner:
  • Does not participate in the management and conduct of the business.
  • Is liable to the firm’s creditors as other partners.

Secret Partner: Secret partner is one who:

    • Takes active part in the conduct and management of the business.
    • Is not known to public as a partner.
    • Is liable to creditors like other partners.
    • Need not serve notice to the creditors regarding his retirement from the business.

Nominal Partner: Nominal partner is one who:

  • Does not contribute towards capital.
  • Does not share gains of the business.
  • He is publicly known as a partner. Actually, he has allowed other partners to use his hame as partner only to oblige

Minor Partner:

  • He himself can not be a partner because he can not contract.
  • He can share in the gains of the firm with the consent of all partners.
  • There should be some person to act as his guardian.
  • He will not bear losses of the firm out of his private property.

1 thought on “Types of partnership”

  1. What is the criteria of profit distribution between active partner and silent/sleeping partner?
    E.g., active partner is the one who is actively involved in the conduct of business but has less investment amount. He seeks sleeping/silent partner for investment but these sleeping/silent partners have more investment than the active partner. What will be the ratio of profit distribution among the active and sleeping/silent partners?
    To more clarify lets take an actual example. There is a project “ABC”, which is granted to a firm on business relations of an active partner. The contract amount is say $15,000. Active partner invests $3,000. Remaining $12,000 dollars is invested by sleeping/silent partners. If the profit is $3,000, then how is the profit ($3,000) distributed among the active partner and sleeping/silent partner? What percentage of the profit is kept by the active partner before profit distribution? because he is the main person who is bringing business to the firm.
    NOTE: after keeping that amount of percentage, remaining amount will be distributed among all the partners as per investment percentage.
    Please guide regarding this scenario.
    Best Regards.


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