Legal Definitions - silent partner

Definition: A silent partner, also known as a dormant partner, is an investor who contributes capital to a partnership but does not participate in the daily operation or management of the business. The silent partner is liable for any debts incurred by the partnership and has the same rights to share in the profits of the business as the active partners. The identity of the silent partner is usually not publicly disclosed.

• John and Jane start a bakery business. John is the active partner who manages the bakery, while Jane is a silent partner who only contributes capital. Jane is still responsible for any debts incurred by the bakery, but she does not participate in the day-to-day operations of the business.
• Tom invests $50,000 in a real estate partnership with his friend, who is the active partner. Tom does not have any say in how the properties are managed, but he is entitled to a share of the profits.

These examples illustrate how a silent partner contributes capital to a business but does not play an active role in its management. The silent partner is still responsible for any debts incurred by the business, but they do not have the same level of involvement as the active partner.