Explain the meaning of "partner by holding out"

cbse
formsofbusiness

#1

1.A person who is not actually a partner of a firm but knowingly allows himself/herself to be represented as a partner of the firm is known as partner by holding out.
2.Such a partner can be held liable for the repayment of debt extended to the firm due to such representation. In order to avoid this liability, such a person should immediately clarify his position to the third party, stating the fact that he/she is not a partner. Failure in clarifying the same would make him liable to the third party for repayment of any debts taken by the partnership firm.
3.Such a partner does not contribute any capital.
4.Such a partner does not take part in the management and its decisions.