Silent Partner

AAA

DEFINITION of 'Silent Partner'

An individual whose involvement in a partnership is limited to providing capital to the business. A silent partner is seldom involved in the partnership's daily operations and does not generally participate in management meetings. A silent partner is also known as a “limited partner", since his or her liability is typically limited to the amount invested in the partnership. Apart from providing capital, an effective silent partner can benefit the enterprise by giving guidance when solicited, providing business contacts to develop the business, and stepping in for mediation when a dispute arises between the other partners.

INVESTOPEDIA EXPLAINS 'Silent Partner'

The silent partner role may not be satisfying to an experienced executive who is used to running the show on his or her own, as it is a background role that cedes control to the general partner.

Since the general partner calls all the shots in a partnership, the silent partner must have full confidence in the general partner's ability to grow the business. The silent partner may also need to ensure that their management styles are compatible.

Silent partners are liable for any losses up to their invested capital amount, and they participate in any tax and cash flow benefits. Participating as a silent partner is a suitable way to invest for individuals who want to have a stake in a growing business without exposing themselves to unlimited liability. An individual who is thinking of becoming a silent partner should fully understand the responsibilities and obligations of this position, and should seek legal advice in case of any doubts.
 

RELATED TERMS
  1. Active Partner

    An invested person who is involved in the daily operations of ...
  2. Startup Capital

    Startup capital refers to the money that is required to start ...
  3. Angel Investor

    An investor who provides financial backing for small startups ...
  4. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  5. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There ...
  6. Partnership

    A business organization in which two or more individuals manage ...
Related Articles
  1. Personal Finance

    How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.
  2. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  3. ogether, management and the board of directors have the ultimate goal of maximizing shareholder value.
    Investing Basics

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  4. Investing

    Georges Doriot And The Birth Of Venture Capital

    Venture capital has been around for centuries, but Georges Doriot turned it into a structured field of investment.
  5. Entrepreneurship

    The Basics Of Financing A Business

    From debt financing to equity financing, there are numerous ways to fund a business startup. But which is the best?
  6. Entrepreneurship

    Small Business Financing: Debt Or Equity?

    There are two sources of financing for small businesses: debt and equity financing. This article explains both.
  7. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  8. Options & Futures

    When Your Business Needs Money: Angel Investors

    If you have a promising business that needs a boost, you may be able to put your faith in these wealthy investors.
  9. Mergers are not the same as acquisitions.
    Investing

    What's a Merger?

    Mergers are not the same as acquisitions. In an acquisition, one company buys and subsumes another company, leaving only the buyer in place. In most mergers, both companies merge to form an entirely ...
  10. Investing Basics

    Enterprise Resource Planning System: A How To

    An ERP system won’t transform poor management into good management, but the real-time business analytics can help make good management even better.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center