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Difficulty: EasyPartnership: Types, Deed, Rights, and Dissolution

In a commercial partnership, which type of partner contributes capital and shares in profits or losses, but takes no active part in the day-to-day management of the firm?

  1. A sleeping partnerAnswer
  2. B
    An active partner
  3. C
    A nominal partner
  4. D
    A quasi partner

Answer

A sleeping partner (also known as a dormant partner)
A sleeping partner, also referred to as a dormant partner, invests capital into the business and is entitled to share in the firm's profits and losses, but chooses not to take an active role in conducting or managing the daily affairs of the enterprise.

Step-by-Step Solution

1
Identify the key characteristics given in the scenario
The partner contributes capital, shares in profits/losses, but does not manage day-to-day operations.
Partnership law classifies partners based on their management involvement, liability, and capital contribution.
2
Match these characteristics to the legal definitions of partner types
A partner who invests capital and receives profit shares while remaining inactive in administration is defined as a sleeping (dormant) partner.
Distinguishing between active management rights and passive investment defines the classification of partners.

Key Concept

Classification of Partners in a Partnership Firm
Estimated Time:45s
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Topics

Partnership: Types, Deed, Rights, and Dissolution

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