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FORMS OF BUSINESS ORGANISATION 35 wealth. They will have to repay the financial status of a partnership firm. entire debt in case the other partners As a result, the confidence of the public are unable to do so. in partnership firms is generally low. (ii) Limited resources: There is a 2.4.1 Types of Partners restriction on the number of partners, A partnership firm can have different and hence contribution in terms of types of partners with different roles capital investment is usually not and liabilities. An understanding of sufficient to support large scale business operations. As a result, these types is important for a clear partnership firms face problems in understanding of their rights and responsibilities. These are described expansion beyond a certain size. as follows: (iii)  Possibility of conflicts: (i) Active partner: An active partner Partnership is run by a group of is one who contributes capital, persons wherein decision making participates in the management of authority is shared. Difference in the firm, shares its profits and losses, opinion on some issues may lead to and is liable to an unlimited extent disputes between partners. Further, to the creditors of the firm. These decisions of one partner are binding partners take actual part in carrying on other partners. Thus an unwise out business of the firm on behalf of decision by some one may result in other partners. financial ruin for all others. In case a partner desires to leave the firm, (ii) Sleeping or dormant partner: Partners who do not take part in the this can result in termination of day to day activities of the business partnership as there is a restriction are called sleeping partners. A sleeping on transfer of ownership. partner, however, contributes capital (iv) Lack of continuity: Partnership to the firm, shares its profits and comes to an end with the death, losses, and has unlimited liability. retirement, insolvency or lunacy of any partner. It may result in (iii) Secret partner: A secret partner is one whose association with the firm lack of continuity. However, the is unknown to the general public. remaining partners can enter into a Other than this distinct feature, in fresh agreement and continue to run all other aspects he is like the rest of the business. the partners. He contributes to the (v) Lack of public confidence: A capital of the firm, takes part in the partnership firm is not legally requiredmanagement, shares its profits and losses, and has unlimited liability to publish its financial reports or maketowards the creditors. other related information public. It is, therefore, difficult for any member (iv)  Nominal partner: A nominal of the public to ascertain the true partner is one who allows the use of Reprint 2026-27