Nowadays, doing any kind of business individually is not an easy task. You need a huge amount of funds to manage your business according to nature and types of business.
When your business earns profit, you have every right to enjoy it alone, but you have to bear all the loss alone if your business is running at loss.
That is the reason why many people nowadays starting their business by collaborating with another person. This kind of business is simply known as the “Partnership Firm”.
There are several rules that have been made to manage the partnership firm in India.
Friends, As we know that there are many types of partners in any kind of partnership firm. Some Partners are active, some are inactive.
All these partners have been categorized by the partnership law and identified by some kinds of terminologies.
There are several kinds of partners may available in any kind of partnership firm. Some examples are Active Partner, Nominal Partner, Partner by estoppel, etc.
However, in this article, we are going to discuss the nominal partner with one example.
We request you to kindly read this article until the end to enhance your knowledge about the nominal partner in the partnership firm.
What is a Nominal Partner?
As we stated earlier, any kind of partnership firm may consist of many types of partners.
A nominal partner is someone who allows you to use his own name/ brand name in your business. Don’t worry we will explain the same thing with an example in the latter part of this article. (So Stay tuned with us till the end!!)
A nominal partner is someone different from the active partner in any kind of partnership venture. He/ She is not so much active in his day-to-day business activities and does not take part actively in any kind of business meetings or production-related work.
Also, the nominal partner is not liable to raise any kind of funds for your business. He is totally free from all this kind of stuff. An active partner himself is responsible for raising the funds for his business.
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 of this question is “No”.
Neither Ronaldo is managing that business nor he is doing any kind of funding or promotion activities for that. He just lending his name to that particular business so it can grow rapidly.
I hope now it will be 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 feature 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.
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 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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