Meaning of Quiet Partner

Meaning of Quiet Partner

The silent partner is never seen in a company and his name does not appear anywhere else. He is actually only involved as a donor and then demands participation. He doesn’t really have anything to say either, unless it has been laid down in a contract.

However, the silent partner also has to bear a certain risk, which is why a contract should always be watertight, otherwise he could lose his contribution. Practically every businessman can take a silent partner or partner, this is also not recorded in a commercial register , so he remains absolutely anonymous.
Only a few things are regulated by law, but the amount of the investment can be freely determined by him. If the company goes bankrupt , the partner loses his entire investment. However, in order to protect themselves to some extent, a silent partner may inspect the books, which usually happens at the end of the year.

There are differences

In general, the contribution of a silent partner can be compared to a loan from a bank , whereby the interest is offset with a share of the profit. However, there are two categories of a silent partner, on the one hand the typical and on the other hand the atypical type of partnership.

Someone who wants to become a silent partner can either be a natural person or a legal person. This person also determines how much capital he wants to get into a company with. However, it always has to be a businessman , no one can become a silent partner with a freelancer .

The silent partner has advantages but also disadvantages, although the advantages outweigh the advantages if it is a healthy company. In detail these are:

  • The silent partner does not appear in any commercial register
  • He remains completely anonymous, which is why we speak of a discrete participation
  • The company can quickly increase its capital without involving a bank
  • There are tax advantages with a typical partner , because a profit participation can be declared as a business expense
  • There are hardly any legal regulations that a partner must adhere to

Disadvantages of a quiet society

  • An entrepreneur can become heavily financially dependent on a silent partner
  • The partner is not mentioned by name anywhere
  • In the event of bankruptcy, the silent partner loses his entire contribution

Anyone who makes money available to a company is a silent partner. There should, but does not have to be, a contract. However, it would be reckless not to put any agreements in writing.

The liability of a silent partner

Since the silent partner does not appear by name anywhere, he is actually only liable with his contribution. He is not obliged to make payments to a third party should the company file for bankruptcy.

On the contrary, when filing for bankruptcy, he can become a creditor himself in order to at least save his investment if the entrepreneur can no longer pay it out himself.

Who can become a silent partner?

As a rule, anyone who is able to provide money can become a silent partner. It does not matter whether it is a traditional company or a company founded. However, the amount of the contribution is determined by the partner, no claims can be made.

Even a private person can look for a silent partner if, for example, he does not get the desired amount from a bank. The silent partner then bears the full risk if he gets involved.

A partner is sought through regional and national newspapers, but there are also people on the Internet who are looking for a partner in this way.
Especially the private environment is one of the silent partners when an entrepreneur is looking for a partner. However, it should never be concealed that a partner hardly has a say unless this has been anchored in a contract. If a partner wants to protect himself in order to have a say, he should become an atypical partner, because only then is it possible to intervene in company policy.

Quiet partner can definitely be worthwhile

Investing your money can be worthwhile if the company is healthy and in good shape. In addition, a silent partner is not liable if the company were to go bankrupt. The silent partner would possibly only lose his contribution, but he cannot be held liable because he does not actually exist.

It should always be a limited partnership, especially when an owner needs quick money. This makes more sense for both sides, the owner is liquid again faster and in the best case the partner is rewarded with a hefty profit.
Why someone wants to become a silent partner is obvious, because he can invest his money profitably without doing anything. In the case of a silent partnership, a contract should never be waived, even if it is a close relative.

Note the clause in the contract

A silent partner should always value a written contract, because this is the only way to secure one hundred percent. If it comes to bankruptcy, it can be tricky for him without a document.

Above all, a contract should contain that the silent partner can not only see the annual balance sheet, but can also inspect the books in the meantime. In this way, he can protect himself should a company go badly so that he can withdraw his deposit in the meantime. Of course, this must also be stipulated in the contract.

If payment difficulties arise in a company, a termination clause is the only measure so that a partner does not lose his capital. The termination should only be given by the shareholder, otherwise the owner could take advantage of this and terminate the partner if bankruptcy became apparent. The partner would inevitably lose all or part of his money.

If you want to become a silent partner, you should definitely inform yourself well in advance, especially when it comes to the contract, things can become incomprehensible. From a tax point of view, this has no negative effects for a silent partner, because the income is part of his capital assets. When the silent partnership ends, taxes only have to be paid if a profit share has been paid out and then taxes can only be levied on this profit share.

Meaning of Quiet Partner