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Introduction to Partnership

How you will ...

Question

How you will classify partner who invest money in the firm's business and take their share of profits but do not participate in the functioning and management of the business?

A

Active or working partner

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B

Sleeping or dormant partner

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C

Nominal or authorized partner

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D

Partner in profits only

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Solution

The correct option is B Sleeping or dormant partner
A partnership basically refers to the contract between two or more people who have agreed to carry on certain business in order to achieve common goals.
According to the Partnership Act, Sleeping or dormant partner are the partners who invest their money into the business and share the profit or losses but they do not participate in the functioning and management of the business.

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Q. How you will classify partner who invest money into the business of the firm, actively participate in the functioning and management of the business and share its profits or losses?

Q. How you will classify partner who do not invest or participate in the management of the firm but only give their name to the business or firm?

M

N

are partners in a firm out of which

M

is sleeping partner and

N

is working partner.

M

1, 80, 000

N

90, 000

N

14.5 %

of profit for managing the business and the rest is shared between both in ratio of their investments.

M^{'}

s share in the profit of Rs.

24000

Q. 'A', 'B', 'C', 'D' and 'V are partners in partnership firm. The firm has different types of partners. Mr. A has contributed capital and participates in the management of firm. He shares profits and losses and is liable to an unlimited extent to the creditors of the firm.
Mr. B has contributed capital and shares its profits and losses. He also has unlimited liability but he does not take part in day to day activities of business. Association of Mr. C is not known to the general public but in all other respects he is like an active partner. Mr. D has allowed the firm to use his name as he enjoys good reputation among clients but he does not either contribute capital or take part in the management.
Master 'E', 15 years of age is entitled to the benefits of partnership with mutual consent of all their members. He is not eligible to take part in management of firm and shares only profits and not losses of the firm.
(i) How many partners do the firm has?
(ii) Who is the active partner and what is the nature of his liability in the firm?
(iii) Who is the sleeping partner in the firm and what is the nature of his liability?
(iv) What kind of partner is Mr.0 and what kind of liability does he have in the firm?
(v) How does the partnership relationship of Mr. C differs from Mr. D ? How do they differ in their liability?
(vi) Is Mast. E a legal partner? Can be held liable for the liability of the firm?

Q. A partner who is entitled to a portion of the profits and is responsible for a share of the losses but does not participate in a company's active business is called

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