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A partner who contributes capital in the firm but does not actively participates in the working of the business is called:
- a)Active Partner
- b)Dormant Partner
- c)Sub-Partner
- d)Nominal Partner
Correct answer is option 'B'. Can you explain this answer?
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A partner who contributes capital in the firm but does not actively pa...
Dormant Partner
A partner who contributes capital in the firm but does not actively participate in the working of the business is called a dormant partner. Let's understand this concept in detail.
Definition
A dormant partner is a partner who only contributes capital in a partnership firm and doesn't participate in the daily operations of the business.
Role
Dormant partners play a limited role in the business. They do not take part in the decision-making process or day-to-day activities of the firm. The role of a dormant partner is restricted to providing funds to the business.
Liabilities
A dormant partner is liable for the debts and obligations of the partnership firm to the extent of his or her capital contribution. However, they are not personally liable for any losses incurred by the business.
Rights
As a partner, a dormant partner has the right to receive a share of profits and losses as per the partnership agreement. They are also entitled to inspect the books of accounts and participate in the meetings of the partnership firm.
Taxation
A dormant partner is taxed on his or her share of the profits earned by the partnership firm. They are also eligible to claim deductions for their share of the losses incurred by the business.
Conclusion
In conclusion, a dormant partner is a partner who contributes capital in the firm but doesn't actively participate in the working of the business. They have limited roles and responsibilities in the business and are only liable to the extent of their capital contribution.
A partner who contributes capital in the firm but does not actively participate in the working of the business is called a dormant partner. Let's understand this concept in detail.
Definition
A dormant partner is a partner who only contributes capital in a partnership firm and doesn't participate in the daily operations of the business.
Role
Dormant partners play a limited role in the business. They do not take part in the decision-making process or day-to-day activities of the firm. The role of a dormant partner is restricted to providing funds to the business.
Liabilities
A dormant partner is liable for the debts and obligations of the partnership firm to the extent of his or her capital contribution. However, they are not personally liable for any losses incurred by the business.
Rights
As a partner, a dormant partner has the right to receive a share of profits and losses as per the partnership agreement. They are also entitled to inspect the books of accounts and participate in the meetings of the partnership firm.
Taxation
A dormant partner is taxed on his or her share of the profits earned by the partnership firm. They are also eligible to claim deductions for their share of the losses incurred by the business.
Conclusion
In conclusion, a dormant partner is a partner who contributes capital in the firm but doesn't actively participate in the working of the business. They have limited roles and responsibilities in the business and are only liable to the extent of their capital contribution.
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A partner who contributes capital in the firm but does not actively participates in the working of the business is called:a)Active Partnerb)Dormant Partnerc)Sub-Partnerd)Nominal PartnerCorrect answer is option 'B'. Can you explain this answer?
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