This pamphlet provides an overview of silent partners. Topics covered include what a silent partner is, steps to take before becoming a silent partner, and how buy-sell agreements are used.
This pamphlet provides an overview of silent partners. Topics covered include what a silent partner is, steps to take before becoming a silent partner, and how buy-sell agreements are used.
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A silent partner is 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.
The silent partner steps back and lets you run the business. Once your business turns a profit, the silent partner receives 20% of the net profit. The profit is what's left after you subtract business expenses from your total sales revenue.
Typically, silent partners are known to only contribute to the business by way of capital infusionthat is, investing money in the business entitywhile a general partner is an active manager in business operations.
Silent partners have limited accounting and legal responsibility. These professionals are able to keep their partnerships private from the public. Silent partners also enjoy limited legal liability.
In partnership businesses, ownership is allocated to each partner's capital account as a percentage of 100 percent, so silent partners should generally hold no more than 49 percent of the business.
Although silent partners can involve themselves as needed, they usually don't participate in managing the business. Their ownership is motivated by return on investment. Silent partners can prevent other partners from making any drastic changes in business structure.
Silent partners are simply investors in the business. Their position as a silent partner accords them the right to review the company's financial statements and to have a voice in decisions that affect changes to the nature or existence of the partnership.