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Silent Partner

A silent partner, or sleeping partner, is a passive financial investor normally found in a limited partnership with little to no say in the day-to-day running of the business.

Typically the silent partner’s liability is limited though not necessarily. When it is not limited, the silent partner is equally as responsible for the business’s finances as a general partner, despite having seldom input into the management of the business. However, if the partnership is limited, the silent partner is only liable for their own investment of capital.

The distinction of the partnership as limited must be decided upon and approved by all involved parties in the partnership agreement for it to be valid. If it is not then the partnership is susceptible to the law as stated in the Partnership Act 1890.

Limited silent partner

The limited silent partner is only responsible for capital up to their investment amount, and it is an effective way for an individual to be involved in a growing business while remaining undisclosed.

The most successful silent partnerships are those where the general partner and silent partner have compatible managing styles; the sleeping partner must have full confidence in the general partner’s ability to grow the business.

Advantages of a silent partnership

There are numerous benefits to becoming a silent partner in a firm including:

Becoming a silent partner

There may arise many instances where you could invest capital and become a silent partner, in which case you must ensure you protect your investment. Though you do not need to know a lot about the industry, it is recommended that you thoroughly research the business you are investing in, which is likely to be a large sum of money.

If you have concerns about doing so and would like to know more about how general and limited partnerships work, contact Ralli’s team of highly experienced solicitors today.

You can talk to us on 0161 832 6131, or alternatively fill in the form to the right to request a consultation.

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