Briefly explain the following types of partnership. (i) Dormant Partner (ii) Active Partner (iii) Nominal Partner

By Ritesh|Updated : September 5th, 2022

Partnership refers to where people work jointly and share their profits from a profession or business. One should not always think that all the partners equally participate in the firm's profits, work, or liabilities. Different partners are based on the extent of liability or participation - like a dormant or active partner, etc.

Types of Partners

The types of partners we regularly encounter are mentioned here.

  • Active Partner

An active partner is called an Ostensible Partner. From the name, he actively participates in the firm and runs the business. He takes care of the business on behalf of all the partners. It means he is an agent for all the other partners and based on all ordinary business of the firm.

Therefore when an active partner wants to retire, he should give public notice. It will absolve him of the activities which the other partners do after retirement. Only if he gives public notice will he not be responsible for acts after retirement.

  • Dormant Partner

A partner who does not participate in the firm's functioning, i.e., who does not actively participate in the daily activities. He is bound by the action of all the other partners.

He will share the profits and losses and bring in the share of capital, similar to any other partner. If a dormant partner retires, there is no need to give public notice.

  • Nominal Partner

A partner with no significant or real interest in the partnership. He is lending his name to the partnership. No capital contributions will be made to the firm, and he will also not have a share in the profits. The nominal partners will be responsible to outsiders and third parties for activities done by other partners.

Summary:

A person who actively participates in the firm and runs the business is an active partner. A person who does not participate in the firm's functioning is a dormant partner. A person with no significant or real interest in the partnership is a nominal partner.

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