Important types of partners in a partnership firm are as follows:
1. Active or actual partners:
Partners who take an active part in the conduct of the partnership business are called ‘actual’ or ‘ostensible’ partners. They are full-fledged partners in the real sense of the term. Such a partner must give public notice of his retirement from the firm in order to free himself from liability for acts after retirement.
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2. Sleeping or dormant partners:
Sometimes, however, there are persons who merely put in their capital (or even without capital they may become partners) and do not take active part in the conduct of the partnership business. They are known as ‘sleeping’ or ‘dormant’ partners.
They do share profits and losses (usually less than proportionately), have a voice in management, but their relationship with the firm is not disclosed to the general public.
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They are liable to the third parties for all acts of the firm just like an undisclosed principal. They are, however, not required to give public notice of their retirement from the firm.
3. Silent partners:
Those who by agreement with other partners have no voice in the management of the partnership business are called ‘silent’ partners. They share profits and losses, are fully liable for the debts of the firm and may take active part in the conduct of the business.
4. Partner in profits only:
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A partner who has stipulated with other partners that he will be entitled to a certain share of profits, without being liable for the losses, is known as a ‘partner in profits only.’ As a rule such a partner has no voice in the management of the business. However, his liability vis-a-vis third parties will be unlimited because in India we cannot have ‘limited partnership’.
5. Sub-partner:
When a partner agrees to share his share of profits in a partnership firm with an outsider, such an outsider is called a sub-partner. Such a sub-partner has no rights against the firm nor is he liable for the debts of the firm.
6. Partner by estoppel or holding out (Sec. 28):
If a person represents to the outside world by words spoken or written or by his conduct or by lending his name, that he is a partner in a certain partnership firm, he is then estopped from denying his being a partner, and is liable as a partner in that firm to anyone who has on the faith of such representation granted credit to the firm.
Actually such a person is not a partner in that firm-no agreement, no sharing in profits and losses, no say in the management, may not be knowing exact place of business, but as he holds himself out to be a partner, he becomes responsible to outsiders as a partner on the principle of estoppel or holding out. It is for this reason that such a person is called as ‘partner by estoppel’ or ‘partner by holding out.’
He may also be called as ‘quasi partner’ for he is not a partner in the full implications of the term; only in the eyes of outside world he is considered a partner. He may also be known as ‘nominal partner.’
It is to be emphasised that in order to entitle a person to bring an action under the doctrine of holding out it must be shown that he acted on the faith of the representation while giving credit to the firm.
It does not matter whether the person representing himself or represented to be a partner does or does not know that the representation has reached the other person so giving credit.
But a person who knows nothing about the representation or who knows but does not believe it or who knows about it subsequently cannot take advantage of this doctrine and make the supposed partner liable as a partner (Juggilal Kamalapat vs. Shiv Chand Bagree).