Seven kinds of partners you may know

In this article, we discuss seven kinds or types of partners. You may already know of them or it may be your first time. Understanding the them will help you understand their role in partnership businesses. However, a common type of partner is the active partner. Let’s roll on!

General Partner

A kind of partner that takes part in the management of the business. He or she is a risk taker. Therefore, suffer any consequences for the bad decisions of other partners. When there is filing for bankruptcy, the general partners may use their personal belongings to pay off creditors.

Limited partner

These kinds of partners do not take an active part in the business. They contribute capital and share the profit of the business. More so, they are responsible for losses of the business just as the general or active partner. However, in the event of bankruptcy, they lose their investment or capital contribution. And their estate will not be affected. This kind of partner is more pronounced in limited partnership entities.

Active partners

It is another name for general partners. They are involved in the daily operations of the partnership business. They head various departments of the business. Such as marketing, finance, operations, human resource, control and risks. They may also be in charge of one or more products or services of the business. Active partners are common with limited liability partnerships.

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Dormant or sleeping partner

We can refer to limited partners as sleeping partners. The reason is that they do not take an active part in the business. They only contribute capital and share in the profit or loss of the entity. Generally, dormant partner is not allowed to manage the business of the other partners. They only observe and receive financial reports about how the money they invested is utilized.

Partner by Estoppel

In this type of partnership, an individual who is not a partner may in words, deeds or actions make another person believe that he is a partner of a partnership entity. Therefore, he becomes liable for whatever outcome arises from his or her activity. However, he cannot share in the profit or loss of the partnership business he or she claimed to belong to.

Nominal partner

A nominal partner contributes his name to the business. He doesn’t play any active role in the affairs of the entity. It is similar to limited partner to the extent that it is not involved in the day-to-day business decisions. However, it is different from dormant and limited partners to the extent that it doesn’t contribute capital to the entity.

A nominal partner is distinguished personally in the community or country. Therefore, he uses his influence to generate contracts and sales for the partnership. He does not share the partnership profit. But he is compensated for his influence.

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Sub partner

Here, the partner is under another partner. Therefore, a sub-partner is not recognized by other partners. He or she doesn’t fall under any of the above kinds of partners. A sub-partner contributes capital to the main partner. Therefore, he or she will share the profit given to the main partner. However, he will not share the losses incurred by the partnership.

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