Partnership Act- Types of partnership and Types of Partners

You can make you own type if you could describe them with certain common features. For example "Fraud Partner", meaning partners which commits fraud, greedy lier etc.! However below are certain types are partner for academic purpose.

Types of Partnership

Partnership At Will

Section 7 provides for partnership at will. It says that whenever there is no provision for the duration of their partnership  or for the determination of partnership (coming to an end), then it would be termed as partnership at will.

This kind of partnership is important for dissolution of partnership, which we will cover later.

Particular Partnership

When two or more people come together for particular venture or adventure or undertaking then it is called as particular partnership. Section 8 of the Act provides the definition of particular partnership.

For example Mr Modi and Mr Rahul come together to make a flyover as a partner!  (And then inaugurate it!)

Partnership for fixed term

In this kind of partnership, duration is fixed and partnership comes to an end after expiry of term. For example, Mr A and B together take contract from Railways to provide some services as partners for 1 year, then this would be partnership for fixed term. Typically such partnership exists for contracts given by Government etc.

If partners continue business after fixed period it becomes partnership at will.

Types based on Liability

First there is Limited partnership:  A limited partnership allows each partner to restrict his or her personal liability to the amount of his or her business investment. Not every partner can benefit from this limitation -- at least one participant must accept general partnership status, exposing himself or herself to full personal liability for the business's debts and obligations. The general partner retains the right to control the business, while the limited partner(s) do(es) not participate in management decisions. Both general and limited partners benefit from business profits. 

Limited Liability partnership: Limited liability partnerships (LLP) retain the tax advantages of the general partnership form, but offer some personal liability protection to the participants. Individual partners in a limited liability partnership are not personally responsible for the wrongful acts of other partners, or for the debts or obligations of the business. 

In Indian there is separate act i.e Limited Liability Partnership Act which governs above partnership.

Types of Partners

  1. Active Partner: Who actively participate in normal business conduct
  2. Sleeping Partner: Doesn't take active part in business . (And sleep!)
  3. Nominal Partner: A partner who lends his name to the firm without having any real interest in it. For example famous person agreeing to be partner, just for reputation!
  4. Sub Partner: When partners agrees to share profits to another person, then this person will become sub partner. Will he have all partnership rights ? 
  5. Holding out partner: It will be discussed in another article on Section 28


Thanks
Legalfundaa






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