Page 2 - Lesson Note 5

LIMITATIONShttps://www.youtube.com/watch?v=QHLQk6rWAi8

1. Limited resources: There is a restrictionon the number ofpartnersandhencecapital contributed by
them is also limited.

2. Unlimited liability: The liability of partners is unlimited and they are liable individually as well as
jointly. It may prove to be a big drawback for those partners who have greater personal wealth. They
will have to repay the entire debt in case the other partners are unable to do so.

3. Lack of continuity: Partnership comes to an end with the death, retirement, insolvency or lunacy
of any of its partner.

4. Lack of public confidence: Partnership firms are not required to publish their reports and
accounts. Thus they lack public confidence.

TYPES OF PARTNERShttps://www.youtube.com/watch?v=1DA26ugwLvE

1. General/Active Partner - Such a partnertakes active part in the management of the firm.
He may also be called a working partner.
2. Sleeping or Dormant Partner: He does not take active part in the management of the firm.
Though he invested money, shares profit &Loss and unlimited liability.
3. Secret Partner : He participates in business secretly without disclosing his association with
the firm to general public. His liability is also unlimited.
4. Nominal Partner: Such a partner only gives his name and goodwill to the firm. He neither
invests money nor takes profit. But his liability is unlimited.
5. Partner by Estoppels: He is the one who by his words or conduct gives impression to the
outside world that he is a partner of the firm whereas actually he is not.His liability is
unlimited towards the third party who has entered into dealing with firm on the basis of his
pretensions.
6. Partner by holding out: He is the one who is falsely declared partner of the firm whereas
actually he is not. And even after becoming aware of it, he does not deny it. His liability is
unlimited towards the party who has deal with firm on the basis of this declaration.
7. Minor as a Partnerhttps://www.youtube.com/watch?v=SI2KL8LKd5Q

A minor is a person who has not attained the age of 18 years. Since a minor is not capable
of enlarging into a valid agreement. He cannot become partner of firm. However, a
minor can be admitted to the benefits of an existing partnership firm with the
mutual consent of all other partners. Hecannot be asked to bear the losses. His
liability will be limited to the extent of the capital contributed by him. He will not
be eligible to take an active part in the management of the firm.

TypesofPartnership business.https://www.youtube.com/watch?v=FVtmjPwNV9Q

A. Classification on the Basics of Duration

Partnership at will: This type of partnership exists at the will of all partners.it means when
a partnership firm is formed to carry on business without specifying any period of time, it is known
as partnership at will.