Types, Right and Duties of Partner

Subject: Business Studies

Overview

The partner who has invested more in partnership business and directly involves in business activities is called active partner. The partners who have invested money but involve in business activity is called sleeping partner.The partner who has invested money but nominated as a partner is called nominal partner.The partner who is retired from business but investment is not written is called quasi-partner.

Types, Right and Duties of Partner

Types of Partner

Active Partner
The partner who has invested more in partnership business and directly involves in business activities is called an active partner. They take all responsibility of business, he/she bears unlimited liability, share the profit of business and devote their full time to the business. For the full-time involvement, active partners receive remuneration and for the investment, he will receive the share of profits.
Sleeping Partner
The partners who have invested money but don’t get involved in a business activity is called a sleeping partner. A sleeping partner bears the loss of business, has unlimited liability and takes all other responsibility as like active partner but he/she is not directly involved in business activities.
Nominal Partner
The partner who has not invested money but nominated as a partner is called nominal partner. He/ she doesn't bear any risk or loss of business. It is a special kind of partners who is nominated as a partner because of his reputation in society.
Quasi Partner
The partner who is retired from business but the investment is not returned is called quasi-partner. This partner is neither liable for business activity nor has right over the profit of business after retirement.
Limited Partner
The partner whose liability is limited to his investment only is called limited liability. As the active partner, limited liability partner shares profit, invest money and participate in business but the difference is that limited partners do not have unlimited liability as an active partner.
Minor Partner
The partner below the age of 16 years age is called minor partner. They are not allowed to sign the legal document of business because of this he can be a partner only under the guardianship of another partner.
Sub Partner
The partner who shares the profit of business with other partners is called sub-partners. It has co-investment (joint investment) with other partners. This is made with mutual agreement and understanding with other partners. There profits and loss of business are share by sub-partners according to agreements made internally by partners.
Incoming Partner
The partners who are going to enter in business is called incoming partners. The incoming partner is required to pay the premium amount to be a partner of existence business. The agreement between existence partners is required to enter a new partner.
Outgoing Partner
The partner who is going to retire from business is called an outgoing partner. The outgoing partner can retire from the business by making an agreement with other partners. He can retire by selling his share to other partners or outside parties in the consent of existing partner. The outgoing partner is not liable for future liabilities of the partnership.
Holding out - Estoppel Partners
The partner who represents himself as a partner but does not invest money in business is called holding out or estoppel partners. He is a partner only in the eye of law or creditors. This partner doesn't share profits and does not bear loss as well. Therefore, he has no any liability of the business.
Secret Partners
A Partners who invests money in the business and shares profit and losses but doesn't like to be disclosed as a partner in front of the public is called secret partners. He provides all necessary helps assistant to business indirectly.

Rights of Partner in Partnership

Right to manage business
All the partners have an equal right to be involved in the management and operation of the partnership business. A partner can involve in planning, decision making, organizing and controlling activities of the business.
Right to express views and ideas
All the partners have a right to give their ideas, knowledge, and experience by making any business decision. Such suggestion is discussed and decided with mutual consent of all partners.
Right to inspect books account
Every partner has right to inspect and take a copy of accounts and financial statements like trial balance, profit and loss account and balance sheet of business in a timely manner.
Right to share profit
Each partner is authorized to claim over a profit of a business. Profit is shared on the basis of a ratio of investment.
Right to be indemnified
All partners are authorized to get compensation for the loss and expenses made personally by partners for business.
Right to use property
All the partners have a right to use a property of business for growth and promotion of business. A partner doesn't have the right to use the property of the business for personal assistance.
Right to join the ownership
All the partners have the right to claim joint ownership of the property of the business firms. All the partners have joint ownership of the property. So that one partner can't sell the property of the firm without a consent of other partners.
Right to get retirement
A partner has right to get retire from business in the consent of other existing partners.
Right to bind other partners
A partner has a right to demand loss (compensation) for the loss or damage occur to the business due to the negligence of other partners.
Right to dissolve the business
A partner can purpose the dissolve of business if he does not see any future prospect.

Duties and Responsibility of Partners

Mutual confidence and understanding
As the partnership starts with an agreement between the partners, it is the duty of the partners not to break confidence, agreement, and understanding between the partners.
To share losses
All the partners are required to share loss from business in the proportion (ratio) of their investment.
Not to transfer interest
It is the duty of partner not to transfer his/her ownership in business without the agreement of partner.
To act within the scope of authority
No partner is allowed to work beyond his/her authority. It is the responsibility of the partner to perform within his authority.
Not to demand remuneration
Even the active partner is not authorized to demand remuneration if it is not mentioned in partnership deed.
To indemnify the business
The partner is required to compensate loss that has occurred in business because of his/her negligent.
Not to run a competitive business
It is the most important responsibility of partner that he shouldn't run similar nature of business by himself.
To maintain up to date account
An active partner must maintain up to date financial state like profit and loss a/c, balance sheet etc. They must be provided on time as demanded by partners.
Not to use the property of the business
The property of business must be used for business purpose only. It is the duty of partner that he must not use for personal benefits.

References:

Khanal, Soma Raj, Surendra Thapa Aslami and Sitaram Dhakal. Business Studies. Kathmandu: Taleju Prakashan, 2067.

Pant, Prem R., et al. Business Studies. Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd., 2010.

Things to remember

Types of partners

Active partners
Sleeping partners
Nominal partners
Quasi partners
Limited partners
Minor partners
Sub-partners
Incoming partners
Outgoing partners
Holding out-estopped partner
Secret partners

Rights of partner in partnership

Right to manage business
Right to express views and ideas
Right to inspect books account
Right to share profit
Right to be indemnified
Right to proper use of property
Right to join ownership
Right to get retirement
Right to bind another partner
Right to dissolve the business.

Duties and Responsibility of partners

Mutual confidence and understanding
To share losses
Not to transfer interest
To act within the scope of authority
Not to demand remuneration
To indemnify the business
Not to run competitive business
To maintain up to date account
Not to use property of business for personal benefits

It includes every relationship which established among the people.
There can be more than one community in a society. Community smaller than society.
It is a network of social relationships which cannot see or touched.
common interests and common objectives are not necessary for society.

Questions and Answers

Mention the rights of partner in partnership.

Each and every partner in partnership has certain rights, The right also has been mentioned in the agreement. The rights of partner in partnership are given below:

Right to manage business
Right to express views and ideas
Right to inspect books account
Right to share profit
Right to be indemnified
Right to proper use of property
Right to join ownership
Right to get retirement
Right to bind another partner
Right to dissolve the business.

Explain different rights and duties of partner.

Certain rights have given to the partners. All the activities and functions should be performed best.The following are the rights of partners which are explained :

Rights of Partners
Rights to manage
Every partner of the partnership firm has an equal right to take part in the management of the firm. Besides this, each has right to attend in planning, implementation, and control activities of the partnership enterprise.
Right to express views and ideas
Every partner has right to express his opinion, view and ideas to the partners for the benefit of the business. Such opinions may be agreed or refused by other partners it will be discussed and decided with the will of all the partners.
Right to inspect books account
Every partner has a right to inspect , inquire, and statement of the firm. They can also obtain copies of account and verify incomes, assets, and liabilities of the firm.
Right to share profit
Each partner has a right to share the profit of the firm and also have bear the loss of the firm. According to the partnership agreement, the amount of profit is shared among the partners on the basis of the ratio of investment.
Right to get compensation
All partners are authorized to get compensation for the loss and expenses paid made by him on behalf of the firm. For the benefit of the firm, a partner should be indemnified for the loss suffered due to the use of persona assets.

Right to get interest
Every partner has right to get interest advances made by him to the firm. According to the partnership deed, he can get interest on his capital from the profit earned in the firm.
Right to use properties
Every partner has right to use the properties of the firm for the betterment , growth, and activities of the firm. It is denied to use the property for the personal rights.
Right to ownership
Every partner has right on the property of the business firm. All the partners have the joint ownership of the property so, one partner only can't sell the firm without the consent of all the partners.
Right to get retirement
Every partner has a right to leave the firm with the consent of al the partners. In the case of partnership-at-will, the partner can leave the firm by leaving the notice to other partners.
Right to dissolve:
A partner can purpose the dissolve of business if he does not see any future prospect. Even, if other partners refuse then also he can dissolve the partnership by informing other partners.

Duties of partner
To work properly
Every partner has to perform his work honestly for the benefit of the business. It is most important that he should show honesty and loyalty in work and other partners.
To share loss
It is the duty of every partner to bear the loss of the firm as per the agreed ratio. If there is no agreement then the losses should be bear by all the partners equally.
Not to transfer interest
None of the partners are allowed to transfer the interest or shares to the others without the agreement of other partners.
To act within the scope of authority
It is the duty of every partner to act within activities of the firm within the scope of the authority entrusted to him. No partner is allowed to work beyond his/her authority. He cannot make any decisions without crossing the boundary of the authority entrusted.
Not to demand remuneration
If there is not mentioned in partnership deed not to demand remuneration, then it is duty of every partner to work in the firm without charging and expecting the remuneration.
To indemnify
All partners are authorized to get compensation for the loss and expenses due to irregularity, negligence, and carelessness made personally by partners.
Not to run competitive business
A partner should not make secret business competing the firm. Similarly, he has to compensate for the loss suffered by the firm is such competing business was taken place.

Explain the types of partner.

The persons who sign the partnership agreement and invests capital to a partnership firm is called partner. he is the owner of the firm.

Active partner
A partner who actively invest more in the business and participate in the daily management and operation of the firm. He takes the decision on behalf of all the partners. He plays an important role and take all the responsibility of the business and bears unlimited liability.
Sleeping partner
The partners who have invested money but involve in business activity is called sleeping partner. He is also known as a dormant partner. Such partner contributes the capital, shares the profit or loss, and ha unlimited liability.
Nominal partner
A partner without any role in the partnership isa called nominal partner. It doesn't bear any risk or loss of busines. He lends his name and credit to the firm for its benifit. The person with public image can be invited as a nominal partner for the credibility and reputation of the firm.
Quasi partner
A quasi partner is one who doesnot contribute to the capital but lends money as loan to the firm. This partner is neither liable for business activity nor has right over the profit of business after retirement.
Limited partner
The partner whose liability is limited to his investment only is called limited liability. A limited partner is also known as special partner. Such partner can not actively participate in the management of the firm.A partner do not pay the firm's debt from his private property.
Minor partner
A partner who is below the age of sixteen is called as minor partner. The liability of the minor partner is limited. He cannot take an active part in the management, but can check the books of the accounts of the firm.
Sub-partner
The partner who shares the profit of business with other partners is called sub-partners. This is made with mutual agreement understanding with other partners. There profits and loss of business are share by sub-partners according to agreements made internally by partners.
Incoming partner
The partner who is newly admitted to an existing partnership firm are incoming partners. The incoming partner brings in cetain extra amount over and above his share of capital for the goodwill of the firm. The agreement between existence partners is required to enter a new partner.
Outgoing partner
An outgoing partner is one who retires from the firm. He is responsible for all the activities and liabiities of the firm before his retirement. The firm has to pay the share of capital with the share of profit to the retiring partner. The outgoing partner is not liable for future liabilities of the partnership.
Holding out - estoppel partner
The partner who represents himself as a partner but does not invest money in business is called holding out or estoppel partners. He is not a true partner. such partner is liable to outsiders for the debts of the firm.
Secret partners
A partner who does not want to disclose his name as a partner of the firm. He provides all necessary helps assistant to business indirectly. Such a partner contributes capital, takes an active part in the management, and shares the profit or loss without exposing himself as partner of the firm.

Quiz

Start

Subjects

Subjects

Subjects

Subjects

Subjects

Subjects

Subjects

Subjects

Subjects