Describe the various kinds of partner in a partnership firm and discuss their rights and obligations.

Active partners

• The partners who take active part in the partnership are active partners.
• These partners carry on business on behalf of the other partner.

• Sleeping or dormant partners are those who do not take active part in the management of the business.
• Such partners only contribute capital to the firm and are bound by the activities of other partners.
• However they have a share in the profits and losses of the business.

Others

• Active and sleeping partners share profits and losses of the business and are liable for its dues.
• However, there are other types of partners also who may be associated with partnership directly or indirectly.
• They are not full-fledged partners. Such partners are as follows:-
  

• Nominal Partners

  • Nominal partners are those who do not have interest in the business but lend their name to the firm.

  • They do not make any capital contribution and are not entitled to take part in management. They are of two types :

• Partners by holding out
  • If a person by his words or conduct holds out to another that he is a partner. He is called partner by holding out.
  • He will be liable to third parties to pay the debts of the firm.
• Partner by estoppel
  • When a person represents to the outside world by his words or conduct or by lending his name that he is a partner, he becomes liable to third party who advance money or credit to the firm on the basis of such representation.
• Special or Limited Partner
  • He is a partner whose liability is limited to the extent of his capital contributed to the firm.
  • He has no authority to take part in the management of business.
• Partner in Profit only
  • A person who shares in the profit of a firm, but who is not liable for the losses is called 'partner in profit' only.
  • Usually, he has no voice in the management of the firm.

Rights of Partners

1. Every partner has a right to take part in the conduct and management of the firm's business.
2. Every partner has a right to inspect copy, books of accounts and records of the firm.
3. Every partner has the right to an equal share in the profit of the firm, unless otherwise agreed by the partners.
4. Every partner has the right to be indemnified for the expenses incurred and losses sustained by him in the ordinary conduct of the firm's business.
5. Every partner has a right to continue in the firm unless expelled in accordance with the terms of the partnership agreement.
6. Every partner has a right to retire in accordance with the terms of the partnership agreement or with the consent of other partners.

1. Every partner must act diligently and honestly in the discharge of his duties to the maximum advantage of all the partners. 
2. Every partner must act in a just and faithful manner towards each other.
3. Every partner must act within the scope of the authority entrusted to him.
4. Every partner is bound to share the losses of the firm equally unless otherwise agreed.
5. Every partner must indemnify the firm against losses sustained due to his wilful negligence in the ordinary course of business.
6. No partner can transfer or assign his interest in the firm to others without the consent of other partners.
7. Every partner must maintain and render true and correct accounts relating to the firm's business.
8. Every partner should use the firm's property only for the firm's business and interest.
9. No partner can make any secret profit by way of commission on purchases or sales effected on behalf of the firm. If he does so, he will have to surrender the same to the firm.