Movie Case Study:
Mahesh Saxena (played by Shakti Kapoor) is discussing the company’s partnership status. There were four partners in a company called Fourfox. Mahesh mentions to Anthony that one partner went abroad and the other was killed. That makes both of them equal partners (50% stake) in the company. In this blog, Learning Perspectives will explore different types of partners in a company.
What are the different types of Partners?
When two or more people decide to join hands together to run a business, it is called a business partnership. There are different types of partners in a partnership firm. Under the partnership Act of 1932, the following can be the partners.
- An individual
- Karta or Hindu Undivided Family
Types of Partners:
As the name suggests, active partners are those who work actively in the partnership company. This partner can also be known as the managing partner. He carries on all business activities on behalf of the other partners as well. To retire from the company, he will have to give public notice in advance.
These partners do not perform in the daily functioning of business activities. However, he has a share in the profit & losses of the company. If he wants to retire from the company, he does not need to give any public notice.
According to the English dictionary, the meaning of nominal is very small or insignificant. It could also mean something that is just for the namesake. A nominal partner means the same. They do not have any significant share in the firm. Hence, they do not make any major contributions to the firm & do not have a stake. They are liable to the outside parties for any acts done by other partners.
Partner in profits only
As the name suggests this partner will have a share in the profits only. They do not share the losses of the company.
Partner by estoppel
Estoppel is a legal rule that prevents or stops anyone from saying in court what was previously established as the truth in the court.
Partner by estoppel means if a partner misrepresents in such a manner in front of the third party that implies they are a partner of a firm. Then by rule, they will be a partner by estoppel. If the third party believes and conducts business with the company. In case there is a default, then the partner by estoppel would be liable.