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Types of Partners in a Partnership

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CA Preeti Aggarwal

On August 13, 2025

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TYPES OF PARTNERS

There may be various types of partners in a partnership firm. Let us discuss them.

1. Active or Actual partner

Partner who takes active part in the conduct of the business of the firm is known as an ‘active’ or ‘actual’ partner.
He is liable to third parties for all the acts of the firm.
He must give public notice of his retirement.
His insanity or permanent incapacity to perform duties may be ground for dissolution of the firm.

2. Sleeping partner or Dormant Partner

Sleeping partner is someone who does not take active part in the conduct of the business of the firm.
He is liable to third parties for all the acts of the firm.
He need not give public notice of his retirement.
His insanity or permanent incapacity to perform duties is no ground for dissolution of the firm.

3. Nominal partner

He lends his name to the firm without having any real interest in the firm. He neither contributes capital nor shares the profits or takes part in the conduct of the business of the firm.
He is liable to third parties for all the acts of the firm.
He must give public notice of his retirement.
His insanity or permanent incapacity to perform duties is no ground for dissolution of the firm.

4. Partner in profit only

A partner who is entitled to share the profits only without being liable for the losses is known as the partner for profits only.
He is liable to third parties for all the acts of the firm.
He must give public notice of his retirement.
His insanity or permanent incapacity to perform duties may be ground for dissolution of the firm.

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.
He has no rights against the firm nor is he liable for the acts of the firm.
There is no question of public notice of his retirement since he is third person not a partner.
His insanity or permanent incapacity to perform duties is no ground for dissolution of the firm.

6. Partner by Estoppel / holding out [Section 28]

A person is held to be liable as a partner by estoppel or holding out if-

He must have represented himself to be a partner by words, spoken or written or by his conduct (active representation) or

He must have knowingly permitted himself to be represented as a partner (tacit representation) and

The other person acting on the faith of such representation must have given credit to the firm.

Even though such a person is not a partner in that firm, he becomes responsible to outsiders as a partner by the principle of estoppel or holding out.

Example 1: Amar, a sole proprietor, employed Akbar as a manager. Amar introduced Akbar as his partner to the supplier of goods. Akbar remained silent. Thinking that Akbar was a partner, supplier supplied goods to Amar on credit. Amar failed to pay the price of goods. Supplier filed a suit against both Amar and Akbar for recovery of price. Here, Akbar is liable as a partner by holding out because he knowingly allowed himself to be represented as a partner and supplier supplied goods on the faith of such representation.

Example 2: A, B, C and D are partners. D retires from the firm but fails to give public notice of his retirement and the firm continues to use his name on the letter heads. D shall be liable as a partner by holding out to the creditors who have lent on the faith of his being a partner.

Where after retirement of partner who has not given a public notice of his retirement, the firm uses the retired partner’s name as partner, he is liable on grounds of holding out, if third party give credit to firm.

7. Incoming partner
A person who is admitted as partner into an already existing firm with the consent of all the existing partners is called ‘incoming partner’. He is not liable for any act of the firm done before his admission as a partner.

8. Outgoing partner
A partner who leaves the firm in which rest of the partners continue to carry on business is called a retiring or outgoing partner. Such a partner remains liable to the third party for all acts of the firm until public notice is given of his retirement.