Types of Partner In a Business


Types of Partner

  • General Partner

  • Limited Partner

  • Active Partner

  • Inactive/Sleeping Partner

  • Nominal Partner

  • Holding-out or partner by Estoppel

  • Partner-in-Profit

  • Secret Partner

  • Sub-Partner

  • Quasi-Partner

  • Minor Partner

  • Incoming Partner

  • Retiring or Outgoing Partner

Types of Partner

A partnership business firm is conducted by different types of partners. Some of them actively take part whereas some others only invest their capital. Some partners become active and some others remain covert, some take part only in profit while others both in profit and loss. The type of partners depends on the partnership deed partners are as follows:

  1. General Partner

In the partnership business, those partners who bear unlimited liability are called general partners. In case a partnership firm suffers losses and the property of the firm is inadequate to pay off liability, even personal property of this type of partner is claimed. So the general partner has unlimited liability. One of the main characteristics of a partnership firm is unlimited liability because almost all the general partners bear unlimited liability.


  1. Limited Partner

If the liability of any partner of a partnership firm is limited to the extent of the capital he has invested, then such a partner is called limited partner. A limited partner can be involved in a partnership firm by stipulating clear provision in the partnership deed or contract. Mostly the limited partners of such firms in Western countries have no right to take par-t in the management and operation of the firms. However, they are not deprived of the rights to see financial records and give advice’ Like the unlimited partner, a limited partner also takes part in profit and loss of the firm’ as partnership cannot be formed without general partners, the number of limited partners may be nominal.

  1. Active Partner

The partner who invests capital and takes active part in operation and management of a partnership firm is called active partner. He manages the firm on behalf of other partners. Mostly in partnership business all the partners do not take active part in the management, only few, of them remain active.

  1. Inactive/Sleeping Partner

The partner, who invests capital and takes part in both profit and loss but does not take active part in operation and management of a partnership firm, is called inactive/sleeping partner’ However, this type of partner is also responsible for activities and liabilities of the firm as an active partner. His liability also remains unlimited. This type of partner may be called dormant or sleeping or silent partner.

  1. Nominal Partner

The person who gives permission to use his name as a partner of a partnership firm is called nominal partner. This type of partner neither invests his capital in the firm nor takes part in conducting it. The firm uses his name for taking benefit from his reputation. people suppose such a partner like other partners and his liability also remains unlimited. This type of partner is also called as ostensible partner.

  1. Holding-out or partner by Estoppel

A person, who neither invests his capital nor takes part in management, but knowingly or unknowingly gives impression to third parties, makes them believe by conducting, showing or mentioning his name in implied, oral or written form that he is a partner of a firm, is called Holding-out partner or partner by Estoppel. In the same belief the third parties treat him as partner and provide credit to the firm. Really he is not a partner of the firm. He is not involved in profit or loss. But he becomes fully liable towards third party as the real ones. This is not allowed by the rule which is called ‘Holding-out Rule’.



  1. Partner-in-Profit

Only If any person enters into agreement only to take share of profit but not of loss, such a ‘partner is called partner in profit. However, he also becomes liable like other partners for The third parry. Such kinds of partners are rarely found in practice.

  1. Secret Partner

The person who is secretly taking part in conducting a firm but he is not known by outsiders is called secret partner. When the outsiders get smell that he is also a partner he becomes responsible for all the debt and liability of the firm. In this sense his liability is unlimited.


  1. Sub-Partner

If any partner of a firm gets into contract with any outsider to divide his share of profit not obstructing the functions and existence of the firm, such an outsider is called sub-partner. In fact he is not the partner of the film and does not need the bear any liability of the film.

  1. Quasi-Partner

If any partner of a partnership firm quits his membership and keeps his invested capital as loan to the firm on condition of taking certain amount of interest is called quasi-partner’ In fact he becomes money lender for the firm.

  1. Minor Partner

Any child who has not reached the legally recognizable age for entering into any contract can also be a partner of a firm with the consent of all the other members of the firm. According to Nepal Contract Act 2056, a person who has not reached the age of 16 cannot sign a contract or such contract does not get legal recognition. So he cannot sign in the partnership contract’ However, such a minor person can also be involved as a partner of profit, loss and property of a partnership firm with the consent of all the partners. He can inspect into the firm’s financial statement and has the right to get a copy of such record. But his liability remains limited’ His personal property cannot be used to pay off the debt of the partnership firm’ Such a minor partner should give decision to the firm about continuing or quitting his partnership within six months after he has reached the legitimate age. If he wants to be a partner, he should sign the contract and his liability also becomes equal to the others.

  1. Incoming Partner

If any person is admitted as a new partner of a running firm with the consent of all the partners, such a partner is called incoming or new partner. He should invest his part of capital along with giving certain amount to the firm for its already earned goodwill’ generally, the new partner dose not any responsibility for the loan taken before the date of his admission’ But, he can agree to share such liability.


  1. Retiring or Outgoing Partner


If any partner has notified the firm giving due date of retirement, or quitting or going to run separate business and is working in the-same firm for the time being, such a partner is called retiring or out-going partner. Any partner can quit or separate himself from the firm with the consent of all partner or their .consensus or handing over formal letter to all the partners’ But until he pays his part of liability or debt taken before the date of his formal retirement, and notice about his format retirement has not been published, he is liable for the loan taken by the firm. Such outgoing partner’s share of the firm’s property share of profit and even the share of goodwill of the firm becomes as debt of the out-going partner to the firm. He can invest it in the firm, or if he wants to take his all amount, it should be paid to him. The aforementioned are the types of partners according to their need, ability, characteristics, nature, rights and liability.


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