TYPES OF PARTNERS
Based on the extent of liability, the different classes of partners are:
- Active or Ostensible
- Nominal
- Sub-partner
- Outgoing Partner
- Sleeping or Dormant
- Partner in Profits only
- Incoming Partner
- Partner by Holding out
Active or Actual or Ostensible partner:
He acts as an agent of other partners for all acts done in the ordinary course of business. In the event of his retirement, he must give public notice in order to absolve himself of liabilities for acts of other partners done after his retirement.
Sleeping or Dormant Partner:
They are called ‘sleeping’ or ‘dormant’ partners. They share profits and losses and are liable to the third parties for all acts of the firm. They are, however not required to give public notice of their retirement from the firm.
Nominal Partner:
A person who lends his name to the firm, without having any real interest in it, is called a nominal partner.
He is not entitled to share the profits of the firm. Neither does he invest in the firm nor take part in the conduct of the business. He is, however liable to third parties for all acts of the firm.
Partner in profits only:
A partner who is entitled to share the profits only without being liable for the losses is known as the partner for profits only and also liable to the third parties for all acts of the profits only.
Incoming partners:
A person who is admitted as a partner into an already existing firm with the consent of all the existing partners is called an “incoming partner”. Such a partner is not liable for any act of the firm done before his admission as a partner.
Outgoing partner:
A partner who leaves a firm in which the rest of the partners continue to carry on business is called a retiring or outgoing partner. Such a partner remains liable to third parties for all acts of the firm until public notice is given of his retirement.
Partner by holding out (Section 28):
Partnership by holding out is also known as partnership by estoppel. Where a man holds himself out as a partner or allows others to do it, he is then stopped from denying the character he has assumed and upon the faith of which creditors may be presumed to have acted.
A person may, by his words or conduct have induced others to believe that he is a partner or he may have allowed others to represent him as a partner. The result in both cases is identical.
It is only the person to whom the representation has been made and who has acted thereon that has the right to enforce liability arising out of ‘holding out’.
You must also note that for the purpose of fixing liability on a person who has, by representation, led another to act, it is not necessary to show that he was actuated by a fraudulent intention.
The rule given in Section 28 is also applicable to a former partner who has retired from the firm without giving proper public notice of his retirement. In such cases, a person who, even subsequent to the retirement, give credit to the firm on the belief that he was a partner, will be entitled to hold him liable.
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