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Definition

Dormant or sleeping partner

Definition (1):

A dormant or sleeping partner is a partner who is both secret and silent. This person is only interested in investing funds in the company for financial profit.

Definition (2):

Dormant or sleeping partner doesn’t actively manage a business and outsiders may not know him. S/he shares profits and losses with existing partners but (if s/he is not a signatory to the agreements of the loan) usually can withdraw from the business without giving any notice to the lenders.

Definition (3):

A partner who doesn’t actively participate in the day-to-day operation of the partnership firm is known as a dormant or sleeping partner. In other words, s/he doesn’t play an active role in the daily functions of the firm. But s/he is bound by all other partners’ actions. S/he will share the firm’s profits and losses and can even bring in her/his capital’s share like any other partner. If this partner retires s/he doesn’t require giving public notice of it.

This type of partner is also called an inactive partner. But s/he is entitled to all of a partner’s rights and is liable for the firm’s and other partners’ all acts.

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