31. Kinds of Partners. Partners are of different kinds, depending on the nature of the partnership agreement and the extent of their liability, expressed or implied, as between themselves or in respect to third persons. The usual classification of partners is as follows: ostensible, secret, nominal, silent, and dormant.
Ostensible partners are those whose names are disclosed to the public as actual partners.
Secret partners are those whose names are not disclosed to the public, though participating in the profits.
Nominal partners are those who allow their names to be used as partners, though they may have no actual interest in the business. The fact of their being known as partners makes them liable to third parties.
Silent partners are those who, while sharing in the profits, take no active part in the management of the business. Their names may or may not be known. Silent partners may also be secret partners,
Dormant partners are those, who are both silent and secret partners. They are usually included in a general term like Company, Sons, or Brothers.
32. Participation in Profits. The most simple partnership from an accounting standpoint is one in which the investments of the several partners are equal, and profits are to be divided equally.
This condition does not exist in all partnerships. The members of the partnership may invest unequal amounts and share in the profits on the basis of their investment. The investment may be equal, but one partner may receive an extra share of the profits in return for work performed in lieu of a salary. The investment may be unequal, but the one with the smaller investment may share equally in the profits in return for work performed. It is not unusual for a silent partner to furnish all of the capital and share equally in the profits with an ostensible partner who assumes full responsibility for the management of the business.
33. Interest on Investment. When the investment of the partners is unequal, it is customary to allow interest on the capital invested and to charge interest on all withdrawals. The interest on capital must be credited, and the interest on withdrawals must be charged, before profits can be distributed.