Working and Sleeping Partners

The present study has discussed the concepts of working partners and sleeping partners along with their examples. The working partners are used to managing the business and hence are paid for their work whereas the sleeping partners only invest the money and do not do any administrative or managerial work. Sleeping partners do not take an active part as the working partners. By the end of the guide, an analysis about the difference between working partners and sleeping partners can be known.

Difference between working partners and sleeping partners

Partner that is working and constantly working is known as a working partner. Alternatively, the other partner that is inactive is called a sleeping partner. The difference between the working patterns and the sleeping partners is that working partners are used to working for the business whereas the sleeping partners only invest money for the business and do not do any administrative or managerial work within the organisation. Working partners are actively engaged in conducting different operations of the organisation. 

Working partners are used to increase the productivity and efficiency of the organisation. On the other side, sleeping partners contribute capital for the organisation in return for an interest in profit generated by the business. Sleeping partners are also known as the silent partners whereas working partners are called active partners of a business. Working partners are used to manage the business and they are involved in day-to-day work of the organisations. However, sleeping partners are not involved in the day-to-day work of the organisation. The working partners work for the organisations, hence are paid for their work. Alternatively, the profit earned by the organisation is divided because of the ratio of the investment of the partners. In India, people that work for the organisation get less money compared to the sleeping partners who invested money for the organisation.

Examples of sleeping partners and working partners

Example 1

Three friends Ram, Sam, and Atharva started a business with an investment of approximately 10 lakhs, 7 lakhs, and 5 lakhs. Ram and Sam are also working as the director and the CEO of the organisation. They get a fixed monthly salary of around 40000 and 35000 respectively out of the profit earned by the company. The company makes a profit of 20 lacs in the financial year. Find out the earnings of Atharva.

From the question, it can be observed that Ram and Sam have a fixed salary that is 40000 and 35000 respectively, while Atharva is a sleeping partner. The share of investment of Ram, Sam, and Atharva is in the ratio of 10:7:5. Therefore, in order to calculate the share of Atharva we need to cut the yearly salaries of Ram and Sam. 

Ram Yearly salary is 40000*12= 480000

The yearly salary of Sam is 35*12= 420000

Thus, the remaining profit of the company after deducting the salary of Ram and Sam is around 11lakhs.

So the share of Atharva will be (5/25 * 11) = 220000

Example of percentages of salary 

Shreya and Rima are partners in a business organisation. Shreya puts in Rs 5000 and Rima puts in Rs 6000. After some time, Shreya received 12 ½ percent of the profit for managing the business and the total profit was divided in the ratio of their capital. Find the total share of Shreya if the total profit is approximately 880.

Shreya is managing the business therefore; Shreya is a working partner whereas Rime is silent therefore Rima is a sleeping partner. Shreya gets 12.5 percent of managing the business and gets his share of profit. 

12.5 % of 880 are equal to 110. Thus, Shreya gets 110 and other profits as well. This profit of Shreya will be based on the investment ratio. The investment ratio of Shreya and Rima is 5:6. Thus the share of Shreya in profit is 5/11 * 770 = 350. Therefore, the total amount gained by Shreya is 110+350 = 460 and the total profit of Rima is 420.  

Types of partners 

There are various types of partners present in a business environment such as follows:

• Working or active partners
• Sleeping or dormant partners 
• Secret partners
• Limited partners 
• Partners in profit only
•  Minor as a partners 
• Sub partners 

Conclusion

The conclusions about the importance of sleeping and working partners in the maths field and their role in the growth and development process of an organisation. Several working and sleeping partner examples have been elaborated as well. In addition, this report also provides examples of the working and sleeping partners to give a proper understanding of the shares of the money among the active and dormant partners.