Fill and Sign the Silent Partners Form

© 2016 - U.S. Legal Forms, Inc USLegal Pamphlet on Silent Partners I NTRODUCTION A silent partner is an investor who either does not take an active role in the management of the business or whose identity is kept secret. It may be a principal whose identity is not revealed by his/her agent. Even if the identity of the silent partner is not revealed to third parties, the silent partner participates in the profits or losses of the business. A silent partner may also be referred to as a sleeping partner, is one who shares in the profits and losses of the business, but is uninvolved in its management, and/or whose association with the business is not publicly known. A silent partner is an investor who does not have any management responsibilities but offers capital and shares liability for any losses experienced by the entity. Silent partners are legally responsible for any losses up to the amount of their invested capital and participate in any tax and cash flow benefits. H OW TO B ECOME A S ILENT P ARTNER There are some suggestions on how to become a silent partner. First, be familiar with the active partners. Having an untrustworthy partner actively handling the company transactions can lead to a serious financial loss. Therefore, doing a bit of investigation about the active partners of a company is wise. It is easy to build a website and place an advertisement claiming that the business is thriving. Check with the Better Business Bureau , local Chambers of Commerce in the local area and other investors to confirm the validity of their claims. Second, put any important terms and agreements in writing. Even if the active partners in the company or business deal are friends or family. Third, read the contract carefully. If you do not understand anything it contains, hire an attorney to go over it with you. Don’t expect the active partner’s attorney to tell you everything. After proper investigation and review of contracts involved, a decision to go ahead and become a silent partner may be made. Investment properties are common transactions that silent partners become involved in. In an investment property deal, silent partners can rake in good returns without many problems or annoying paperwork. Results vary from business to business; therefore, it is better to evaluate the active partners as well as the nature of the business itself before putting up the money. It is extremely important for the people entering the partnership agreement to discuss and formalize the terms and conditions of their partnership in writing beforehand in order to avoid future disputes and complications. B UY -S ELL A GREEMENTS A buy-sell agreement is an agreement between partners of a partnership or between a shareholder and a corporation whereby the parties agree to the terms and conditions of a future sale of the partners or shareholder's interest. By signing the agreement, the party contractually limits his or her ability to dispose of his or her interest in the partnership or corporation to the terms of the agreement. Such an agreement will specify who may buy the departing owner's interest, the events that will trigger a buyout, how the price is determined, and other details. A buy-sell agreement is useful in assuring the orderly transfer of interests in the partnership or corporation. By limiting a party's ability to dispose of his or her interest in the partnership or corporation, control of the partnership or corporation may be assured.