5 Types of Partners are listed and explained in this article. We hope you find it informative and able to meet the demands of your research.
In our previous article on the partnership, you must have learned about the partnership, its advantages, and disadvantages.
Read Also: Partnership in Business
In that article, we gave you two types of partnership bringing all the types of partnership into two categories.
In this article, we will be breaking down the types of partnership thereby enlarging them from the two we earlier stated to the 5 general partners that are available in a business partnership.
This, however, does not overrule the other types we gave but it is simply a breakdown for the sake of students who need it for their assignment or course works.
Types of Partners
Read Also: Sole Proprietorship
Here are the 5 types of Partnership in Business
1. Limited partner
A limited partner is that partner in a partnership agreement who has agreed to bring to the table, a certain sum to the business and is constrained by virtue of the law from taking any active part in the management and administration of the business.
He is responsible for the debts and obligations of the partnership only up to the amount of capital he has contributed. A limited partner has limited liability. He is more or less like an investor in the business.
2. General partner
A general partner has the full power of participating in the conduct and management of the partnership business. He is entitled to take a full share in the management of the company.
This kind of partner is liable to the full extent of his estate for the partnership debts, i.e. he has unlimited liability. He is a hundred percent part of the business and not just a finance supplier to the business.
Read Also: Advantages of Sole Proprietorship
3. Active partner
An active partner takes an active part in the management and administration of a partnership business. He contributes to the financing and formation of the business takes an active position in the everyday running of the business and is being paid a certain sum as salary from the business.
4. Nominal or quasi-partner
This kind of partner only has his name to contribute to the success of the business. He does not contribute capital in any form or partakes in the management of the company.
Usually, a nominal partner is usually someone of great reputation; someone in which by virtue of his name, the company can make a higher return on investment.
Although this kind of partner does not invest capital into the business, he usually takes a part in the profit made from the company and also is involved in the sharing of loss should there be a loss in the company. This nominal partner is usually either a successful business person or politician or even a brand.
Read Also: Disadvantages of Sole Proprietorship
5. Sleeping or dormant partner
Just like the name implies, sleeping partners just invest their funds and go to sleep. They do not do any work in regards to the company, all they do is to invest their capital and then wait for the time of sharing profit. Because they do not work in the company, they do not earn a salary, they simply partake in the profit sharing of the company.
However, if the company gets involved in any kind or form of debt, the sleeping partner always takes a portion of the burden regardless of who caused it as long as the debt was accrued by the company.
Those are the types of partnership available in business, all of them have their pros and cons and you can decide to chose which one you want to be in a partnership agreement before appending your signature.