Partnership Types and Roles

Study Notes

Active Partners: Involved in the day-to-day operations of the business
Sleeping Partners (Dormant Partners): Not involved in the day-to-day operations, but still share profits and losses
Nominal Partners: Not involved in the business, but lend their name to the partnership
Partner by Estoppel: A person who allows others to believe they are a partner, even if they are not

Managing Partner: Oversees the partnership's operations and makes key decisions
Limited Partner: Has limited liability and is not involved in the day-to-day operations
General Partner: Has unlimited liability and is involved in the day-to-day operations

Partnership Agreement: A written agreement outlining the terms of the partnership
Admission of New Partner: Existing partners agree to admit a new partner, usually by a unanimous decision
Revaluation of Assets: Assets are revalued to reflect their current worth
Goodwill Valuation: Goodwill is valued and allocated to the new partner
Capital Adjustment: Existing partners' capital accounts are adjusted to reflect the new partner's admission

Written Agreement: Outlines the terms of the partnership, including roles, responsibilities, and profit-sharing
Partnership Deed: A formal document outlining the partnership agreement

Fiduciary Duty: Partners owe a duty of loyalty and care to the partnership and each other
Accounting and Disclosure: Partners must maintain accurate accounts and disclose financial information to each other
Indemnity: Partners are liable for each other's actions

Provision for Workmen Compensation: A reserve fund set aside to cover work-related injuries or illnesses
Liability: The partnership is liable for workmen compensation claims

Fluctuations in Investment Value: A reserve fund set aside to account for changes in investment value
Profits and Losses: Gains or losses on investments are allocated to the reserve fund

Revaluation of Assets: Assets are revalued to reflect their current worth
Adjustment of Capital Accounts: Partners' capital accounts are adjusted to reflect the revalued assets

Active Partners are involved in the day-to-day operations of the business
Sleeping Partners (Dormant Partners) are not involved in the day-to-day operations, but still share profits and losses
Nominal Partners lend their name to the partnership, but are not involved in the business
Partner by Estoppel is a person who allows others to believe they are a partner, even if they are not

Managing Partner oversees the partnership's operations and makes key decisions
Limited Partner has limited liability and is not involved in the day-to-day operations
General Partner has unlimited liability and is involved in the day-to-day operations

A Partnership Agreement outlines the terms of the partnership
Existing partners agree to admit a new partner, usually by a unanimous decision
Assets are revalued to reflect their current worth
Goodwill is valued and allocated to the new partner
Existing partners' capital accounts are adjusted to reflect the new partner's admission

A written agreement outlining the terms of the partnership, including roles, responsibilities, and profit-sharing
A Partnership Deed is a formal document outlining the partnership agreement

Partners owe a duty of loyalty and care to the partnership and each other (Fiduciary Duty)
Partners must maintain accurate accounts and disclose financial information to each other (Accounting and Disclosure)
Partners are liable for each other's actions (Indemnity)

A provision for workmen compensation claims is set aside to cover work-related injuries or illnesses
The partnership is liable for workmen compensation claims