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2. Profit sharing partnership

Such partnership involves certain number of partners who are involved to share the
profit, but not the loss. However, those partners are liable to the third parties for all
acts of the firm. The number of such partners is chosen according to the agreement
among the partners. Such partners are not allowed to take active participation in
management.

3. Limited partnership
It is such kind of partnership in which there exist partners who have limited liability.
Therefore, at least one partner should have unlimited liability and at least one
must have limited liability. The special partners, who have limited liability, cannot
participate in the management but can make suggestions to the management.
Kinds of partners

1. General and Limited Partners: Ordinarily all the partners of a firm have unlimited
liability. Such partners are known as general partners and the partnership, as general
partnership. But the law allows some partner to have the liability or obligation limited
to the amount of capital contributed by him or her. Such partners are called limited
partners, and the partnership, limited partnership. All the partners in a firm cannot
have limited liability. The liability of some of the partners must be limited.
The limited partner has his rights curtailed. He must not take any part in the
management of the business. He may advise, inspect books of account, but cannot
control. His position is rendered the more ineffectual from its point of view, by reason
of the fact that if he dislikes the way of business is being carried on, he has little scope for
interference. He cannot dissolve partnership. A limited partner is an inactive partner
who contributes capital and merely shares profits and losses of the firm. Generally, a
senior partner who desires to retire and who trusts his co-partner leaves his capital
with them and becomes a limited partner. The advantages of limited partnership are
that the firm is enabled to obtain additional capacity without converting itself into a
limited liability company. One can start a new business with the aid of friends and
relatives, who can, with reasonable safety and lessened liability, risk their money.
2. Active or Ordinary partners: Active or Ordinary partners are those who take
upon an active part in a business. Active partner invests capital as well as takes active
part in the general conduct of the business. However, the reward may or may not be
paid to him which depends on the agreement made with other partners.
3. Sleeping, Dormant or Silent partners: Sleeping, Dormant or Silent Partners are
those who, unlike active partners, do not take open part in the business and do not
appear to the world as partners, although they have money in the firm and share the
profits.
4. Nominal or Supposed partners: Those who do not contribute any capital
or share in profits but lend their names and credit to the firm, or otherwise hold
themselves out as partners therein. Such persons incur the liability of a partner as
between themselves and third parties dealing with the firm.

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