Silent Partner – Definition

Cite this article as:"Silent Partner – Definition," in The Business Professor, updated April 15, 2019, last accessed August 8, 2020, https://thebusinessprofessor.com/lesson/silent-partner-definition/.

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Silent Partner Definition

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.

A Little More on What is a Silent Partner

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 Partner’s Liability

Silent Partner’s 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.

References for Silent Partner

Academic Research on  Silent Partner

Limited partnership: Business, government, civil society, and the public in the Extractive Industries Transparency Initiative (EITI), Aaronson, S. A. (2011). Limited partnership: Business, government, civil society, and the public in the Extractive Industries Transparency Initiative (EITI). Public Administration and Development, 31(1), 50-63. This paper assesses the ineffectiveness of Extractive Industries Transparency Initiative (EITI) – the public-private initiative, where the public is the Silent Partner.

Breaking the silent partnership: businesswomen in popular fiction, Albertine, S. (1990). Breaking the silent partnership: businesswomen in popular fiction. American literature, 62(2), 238-261. This paper sheds light on the history, overview, growth, and impact of women in business as portrayed in American literary fiction.

Double taxation treaties: The autonomous interpretation method in German and English law; as demonstrated by the case of the silent partnership, Heidemann, M., & Knebel, A. (2010). Double taxation treaties: The autonomous interpretation method in German and English law; as demonstrated by the case of the silent partnership. Intertax, 38, 136. This paper sheds light on German and English double taxation treaties via the Silent Partnership lens.

A “Silent Partnership”?: The US Government, RCA, and Radio Communications with East Asia, 1919-1928, Rossi, J. P. (1985). A “Silent Partnership”?: The US Government, RCA, and Radio Communications with East Asia, 1919-1928. Radical History Review, 1985(33), 32-52. This paper explores the implications of the partnership between the US Government and China for help with the establishment of radio communications in 1928.

Partnership, Limited Partnership, and Joint Venture Interests as Securities, Long, J. C. (1972). Partnership, Limited Partnership, and Joint Venture Interests as Securities. Mo. L. Rev., 37, 581. This paper explains different kinds of business partnerships, ventures, and equity structures.

The Silent LLC Revolution-The Social Cost of Academic Neglect, Friedman, H. M. (2004). The Silent LLC Revolution-The Social Cost of Academic Neglect. Creighton L. Rev., 38, 35. This paper charts the rise of the LLC firms and critically examines the academic neglect of this silent economic revolution.

Duty of Care: The Partnership Cases, Beveridge Jr, N. P. (1990). Duty of Care: The Partnership Cases. Okla. City UL Rev., 15, 753. This paper takes a look at the Union Partnership Act of 1914 and its revisions.

A Comparison of Partnership Income Taxation in the United States and Germany: A Study in Differences, Schwidetzky, W. D. (1994). A Comparison of Partnership Income Taxation in the United States and Germany: A Study in Differences. Am. UJ Int’l L. & Pol’y, 10, 1331. This paper takes a look at the difference in the United States and German taxation structures pertaining to Business Partnerships.

Silent contributors: Asian female entrepreneurs and women in business, Dhaliwal, S. (1998, September). Silent contributors: Asian female entrepreneurs and women in business. In Women’s Studies International Forum (Vol. 21, No. 5, pp. 463-474). Pergamon. This paper takes a look at the contribution of women entrepreneurs to business in the Asian continent.

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