Partnerships are a form of business association between two or more persons who join to carry on a trade or business. Each person contributes money, property, labour or skill and expects to share in the profits and losses of the business.

As per Section 4 of The Indian Partnership Act, 1932 “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all Persons who have entered into partnership with one another are called individually, “partners” and collectively “a firm” and the name under which their business is carried on is called the “firm-name

TYPES OF PARTNERSHIP

 (a) Partnership at will is a partnership formed for an indefinite period. Time period of partnership is not fixed norspecified.

 1)Such type of partnership can continue for anyperiod of time depending upon the will of t the partners. 

2)It can be dissolved by any partner by giving a notice to the other partners of his desire to quit the firm.

 (b) Particular Partnership is a partnership formed for a specific time for a specific purpose.  Once the time is over or purpose is achieved, it cease to exist 

(c) Partnership for a fixed period is a partnership formed for a fixed period between partners.

TYPES OF PARTNERS 

Working partner or Active partner – – Active partner contributes capital and also takes active part in the management of the firm. – He bears an unlimited liability for the firm’s debts. – He is known to outsiders. – He shares profits of the firm. – He is a full-fledged partner. 

Sleeping Partner:

Sleeping partner does not indulge in the working of the firm. He/She does not invest time and effort and ignores almost all of the firm’s daily operations. His/Her involvement is limited only to providing their share of capital to the business. 

A sleeping partner shares both profit and losses. He/She may get a lesser amount of profits to compensate the working or active partners.

Dormant Partner:

Dormant partner is a partner who invests capital, may take part in management decisions but do not disclose his/her status as a partner to the outside world. A dormant partner may also be called a secret partner as their role as a partner in the firm is not known to many. 

The liability of a dormant partner may be limited to the extent of their capital or contribution, as they can’t be held liable for overall projects. They may get profit up to the projects that they were indulged in.

Partner in profits only – – Partners in profit only share in the profits of the firm but not in the losses; – His liability is unlimited; – He is not allowed take active part in the business; – Such a partner is associated for his money and goodwill. 

Nominal Partner – – Nominal partner only lends his name and reputation for the benefit of the firm. – He represents himself or knowingly allows himself to be represented as a partner – Such type of partner neither contributes capital nor takes part in the management ofbusiness. – He does notshare in the profits or losses of the firm.

Ostensible Partner or Partner by Estoppel:An ostensible partner or partner by estoppel is one who by his acts appear to be a partner of the firm. He leaves an impression in front of others that he is associated with the partners of a firm and is one of them. 

Such a partner is liable for losses or liabilities caused by such an impression or illusion that he created in the minds of the clients, shareholders, etc. Such a partner must express his role of being a partner either using express or implied words. 

Partner By Holding Out:A partner by holding out is one who is represented by other partners to be a partner of the firm. He is held accountable only when he does not interfere or deny such claims of the partners. It is thus the duty of a person to clarify if someone falsely claims them accountable and a part of a firm as a partner. 

A partner by holding out just like a partner by estoppel is liable only for the amount of loss that the firm incurs due to that false representation. He is not entitled to any profit. 

Partner in Profit Only:A person who, as a partner in a firm, receives only profit is a partner in profit only. All other partners of the firm must agree to the entry of such a partner. A partner in profit only is not liable for losses and cannot be asked to compensate in any such situation of loss.

Minor as a Partner:A minor can be admitted to a partnership by the partners’ consent. A minor can only receive profit and is a partner in profit only. He/She cannot be held liable for any losses. A minor can be admitted with the consent of his/her guardian. 

After acquiring the age of majority, the minor can choose to either quit the firm and receive all the profits accruing to date or continue as a normal partner and be liable to the losses from the date of his joining the firm. 

Secret Partner:A secret partner is one who does not disclose the fact of being a partner in the firm to anyone. Such a partner may take part in the firm’s daily operations or contribute capital and thus share profit and loss with the partners. Such a partner shares both profit and loss with other partners.

Outgoing Partner:

An outgoing partner decides to leave the firm. A partner may leave a firm due to various reasons like a conflict of ideas, dissatisfaction relating to profit sharing ratio, etc. An outgoing partner may need to serve a notice period or may be required to fulfil certain conditions even after disassociating with the firm. 

When a partner decides to leave a firm, the accounts of the firm are closed. The partners must either restart or reform the partnership after deciding various aspects like profit-sharing ratio, capital requirements, etc. 

An outgoing partner must compensate for his share of all the losses that the firm incurred during his tenure. After clearing all the debts and paying off all the liabilities, leftover profit is shared among the old partners in a fixed profit sharing ratio. Old reserves, funds, etc., are also cleared at such a time. 

Limited Partner:A limited partner is one whose terms of liability is fixed and ascertained previously. Such a partner may receive profit in the same ratio as the loss. In case of loss, such a partner cannot be asked to compensate more than that ascertained amount. In most cases, the amount of the capital is equal to the amount of liability; thus, that partner is not entitled to lose more than that. 

Sub-Partner:A person who is not a direct partner in a firm but receives profit indirectly is known as a sub partner. When a firm partner decides or determines to share part of his profit with any other person or any other third party, such party or person is referred to as sub-partner of the firm.

Such a partner is not anyhow entitled to claim any share of profit from the firm. Such right is limited only up to the partner who agrees  to share his part. The firm also cannot force such partners to compensate for any loss.

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