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What is a silent partner? 

On Behalf of | Dec 23, 2022 | Entrepreneurial Law |

Generally, when two people become business partners and start a company together, neither one is silent. They both have a say in the process, they have ownership of the business and they get to work together to decide how they’re going to run it. In fact, they may have spent a long time making many of these decisions before even officially establishing the business and opening their doors.

But, in other situations, you will have someone who is considered to be a silent partner. What does this mean and how does it change the relationship?

Monetary support without decision-making power 

When someone is a silent partner, they certainly are involved with the business, but it is a very limited type of involvement. They don’t go to business meetings. They don’t make decisions about how the company runs. They’re not involved in day-to-day operations and they may rarely even visit the business.

Instead, this person can provide the financial capital that the business needs. They are making an investment with the hope that the business will be successful and they will get a good return on their money.

But the reason that they agreed to this is that they trust the other business owner to understand the market and the company in a way that they do not. They believe that this person will make sound decisions and they don’t need to have any say in what those decisions are. This makes their limited role very simple and easy, but, if it all pans out, they could stand to get quite a financial return.

As you set up your business, you can see how important it is to understand the different roles and options you have.