Silent Partner - Explained
What is a Silent Partner?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP
What is a Silent Partner?
Silent Partners are investors in a business whose sole responsibility is providing capital. They do not get involved with the day to day operations of the business, nor have any voting rights. There job is done once the money exchanges hands. Thereafter, they get an agreed upon percentage of the gross profits on a regular basis. They are also known as Limited Partners or Sleeping Partners, as they don't shoulder any liability for the business apart from the money they've invested.
What Does a Silent Partner Do?
Although the Silent Partner shoulders no responsibilities towards the growth and establishment of the business, a good silent partner can offer additional resources like granting access to helpful business acquaintances, guidance for the company's direction, resolving disputes between partners, and more. But the Silent Partner is under no obligation to offer additional sops. Their role is limited to staying in the background and providing capital when necessary, and partake in the profits when they start flowing in.
Creation of a Silent Partnership
Creating a Silent Partnership requires the registration of a business as a Limited Liability Company (LLC) or a general partnership. Once the firm is officially in business, a formal contract is required to legally enter into a Silent Partnership. This contract states the terms and conditions of investments, percentage of profits that will be due to the Silent Partner, the frequency of payments, and other details. Partners will be responsible for meeting all the financial obligations of the business except in case of an LLC.
The Silent Partners Liability
Silent Partners liabilities are chiefly limited to the losses incurred on the investments they've made. Any additional liability needs to be included in the official contract for the Silent Partner to assume.
Silent Partners vs. Secret Partners
Silent Partners in a business are known to the world and their investments aren't discreet. Secret Partners on the other hand participate discreetly in the business, may assume more operational responsibilities and financial liabilities than a Silent Partner but stay behind the scenes. Their participation is anonymous, not limited.
- Business Entities (Intro)
- Why is studying business entities important?
- Considerations When Forming a Business Entity
- Holistic (Detailed) Overview of Setting Up a Business Entity
- What are Business Entities?
- What is a Closely-held vs Publicly-held Business?
What are the main types of business entity?
- What are the primary characteristics of business entities?
- What is Creation of a business entity?
- Where to Form a Business
- Incorporating in Delaware
- Forming an LLC in Nevada or Wyoming
- Creating a Company Offshore
- Promoter Liability
- De Jure Corporation
- Ultra Vires
- Brassplate Company
- What is Maintenance of a business entity?
- What is Continuity of a business entity?
- Business Continuity Planning
- Buy Sell Agreements
- Shotgun Clause
- Winding Up
- Dissolving a Foreign Qualification
- What is the Ownership structure of a business entity?
- Joint Stock Company
- Parent Company
- Subsidiary Company
- Wholly-Owned Subsidiary
- State-Owned Enterprise
- Mutual Company
- What is Control of a business entity?
- What is Personal liability of owners of a business entity?
- Entity Theory
- Piercing the Corporate Veil
- What is Compensation of business owners?
- What is Taxation of a business entity?
- What is Sales & Use tax?
- What are payroll and self-employment taxes?
- What are the major characteristics of a Sole proprietorship?
- Uniform Partnership Act
- Uniform Limited Partnership Act
- Partnership Agreement
- At-Will Partnerships
- Responsibilities of Partners to the Partnership
- Silent Partner
- Funding the Partnership
- How are Partners Compensated
- Splitting Equity in an Industrial Partnership
- Terminating the Partnership
- Types of Partnerships
- What are the main characteristics of a General partnership?
- Tort Liability of General Partner
- What are the main characteristics of a Joint venture?
- What are the main characteristics of a Limited partnership?
- Family Limited Partnership
- Master Limited Partnership
- What are the main characteristics of a Limited liability partnership?
- What are the main characteristics of a Limited liability company?
- Forming an LLC
- Articles of Organization
- Operating Agreement or LLC Agreement
- Why You Need an LLC Agreement
- LLC Compensation of Members
- LLC Taxation
- Converting to an LLC
- What are the main characteristics of a Corporation
- Articles of Incorporation
- What to include in the Articles of Incorporation
- Corporate Bylaws
- Exiting the Corporation
- Dissenter's Rights
- What are the requirements to be an S Corporation?
- Non-Profit Organization
- NonProfit Business Entities
- Private Foundation
- A Detailed Explanation of the Sole Proprietorship
- Taxation of Sole Proprietorship
- A Detailed Explanation of the General Partnership
- 50/50 Partnerships: Never a Good Idea
- Publicly-Traded Partnerships
- A Detailed Explanation of the Limited Liability Company
- A Detailed Explanation of the Corporation
- Keepwell Agreement (Letter of Comfort)
- Personal Service Corporation Definition
- A Detailed Explanation of the Non-Profit Entity
- Public Limited Company (UK)