What do you mean by the nominal partner

What do You Mean by Nominal Partner? Explain Nominal Partner With Example.

Individually doing any type of business nowadays is a difficult endeavor. Depending on the kind and type of business, you’ll require a substantial amount of money to run it.

When your business makes a profit, you have every right to enjoy it on your own; nevertheless, if your firm is losing money, you must endure the entire loss on your own.

That is why, in today’s world, many people have started their businesses by partnering with others. The “Partnership Firm” is the name for this type of company.

To handle the partnership firm in India, numerous rules have been established. Friends, As we all know, there are many different sorts of partners in each partnership company.

Some Partners are active, while others are dormant. The partnership law has classified and recognised all of these partners using various terms. In every partnership company, many types of partners may be offered.

Active Partner, Nominal Partner, Partner by Estoppel, and so on are some examples. However, we will use one instance to describe the nominal partner in this article.

We respectfully recommend that you read this essay through to the conclusion in order to have a better understanding of the nominal partner in a partnership company.

People also read: What do you mean by a secret partner in any partnership?

What do you mean by the nominal partner

What is a Nominal Partner?

As previously stated, each sort of partnership company might have a variety of partners.

A nominal partner is someone who lets you use his or her own name or brand name in your company. Don’t worry, we’ll explain it with an example in the last section of this post. In any type of partnership enterprise, a nominal partner is someone who is not an active participant.

He is not as involved in his day-to-day business operations as he once was, and he does not actively participate in any business meetings or production-related activity. Furthermore, the nominal partner is not obligated to raise any capital for your company. He is completely unchanged by any of this.

What is the responsibility of nominal partner
A nominal partner is someone who lends his name to grow your business and in return, he/she charges a certain amount of money. All the things have been discussed in the latter part of this article.

Generally, when you want to boost the business by using the name of a well-known person, then this option of Nominal Partner comes into existence

In countries like India, it is seen that newly opened start-up usually tends to use the name of some famous personality to boost their business rapidly by making that person as to their nominal partner. 

Example of Nominal Partner

Let me try to explain the same thing by taking the name of famous football player Cristiano Ronaldo.

As we all know that Cristiano Ronaldo is one of the most famous football players in the world right now. Suppose some brands or companies approach Ronaldo to make him a nominal partner in their venture and he also accepts their proposal.

Now what that brand or company will do is, they will use the name of Ronaldo as their partner. As Ronaldo has a huge fan following, his fans will start to buy that brand’s product or invest their money in it.

Now, what are you thinking? Is Ronaldo Managing this business? Is he raising funds for this business? Is he looking after the daily activities of that business?

The short and simple answer to this question is “No”.

Nominal partner Meaning - YouTube

Neither Ronaldo is managing that business nor he is doing any kind of funding or promotion activities for that. He just lent his name to that particular business so it can grow rapidly.

I hope now it will be a clear cut in your mind, especially about the nominal partner.

Now you must be thinking that what’s new in this, Ronaldo has become the brand ambassador of that company. Sorry to say you but you are wrong my friend.

There is a huge difference between Being a brand ambassador and a nominal partner of any business firm/ Company. You can read the same difference from here.

Now, we will share some salient features of the nominal partner.

Is Nominal Partner Enjoy Profit Sharing in Business?

Now you are thinking that yes the nominal partner has all the rights to enjoy the profit of that particular business. My dear friend, Sorry to say you but you are wrong again.

Nominal partners do not share any kind of profit or loss which a business has earned from its day-to-day activities. He is not responsible for any kind of profit and loss in that particular business.

What is the liability of the nominal partner

Instead of sharing any kind of profit and loss, a nominal partner usually charge a certain amount of money as a nominal charge. You have to pay a certain charge to your nominal partner at a regular interval.

The nominal charge of any nominal partner is depending upon the nature of your business, name and the fame of the nominal partner, your profit-earning capabilities and so many factors.

What is the Liability of Nominal Partner?

Many people have a lot of confusion about the liability of the partners. But here we want to tell you that even though the nominal partner is not taking an active part in the business, his liability remains unlimited.

I know you are wondering that if the nominal partner is not sharing revenue with him/her, then how can he be responsible for any kinds of liabilities. Well, the reason is obvious and we are going to tell you the same in the next paragraph.

Whenever a person associates his name with someone’s business, then people invest money in that business by looking at his name. The nominal Partner is also responsible for that business’s growth and loss.

That’s why the nominal partner has unlimited liability despite being not so active in business or not enjoying any kind of profit-sharing activity in that particular partnership firm’s business.

Final Words on Nominal Partner With Example

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If you have any queries regarding this article, then kindly share them with us by commenting in the comments section. Thank you so much for sharing your valuable time with us and reading this article till the end.

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