Decoding the Role of a Silent Partner

Decoding the Role of a Silent Partner

The silent partnership works on the concept of non-interference in company affairs.

When it comes to raising funds for the business, bootstrapping, venture capitalists and angel investors are the standard choices in every entrepreneur’s mind. However, with each investment option, there is a fear of losing control due to outside influence. 

If you are not ready to give up control and ownership of your startup, then a silent partner can be your go-to investment source. However, before coming up with a decision, you should understand the role of silent partnership.

What is the difference between an investor and a silent partner?

A traditional investor invests in a startup and gets involved in daily operations. They can also hold an “advisory” position in the companies they are investing in.

On the other hand, silent partners—or limited partners—are investors who invest capital in a startup but have no say in the management decisions and day-to-day operations—hence, they are “silent.” In return, they hold equity control and expect a substantial share in the startup’s profits and losses.

If your only goal is getting funds without interference from external investors, then a silent partnership is your go-to option. What’s more, you get to be your boss and lead your startup journey on your terms.

How does a silent partner get paid?

Though silent partners don’t get involved in business operations, they are liable for profits and losses up to their ownership percentage. In a partnership agreement, the share of profit and loss of each partner is clearly documented. Generally, profit and loss share is divided according to the ownership interest of the partner. For example, if a partner has a 10 percent stake in the company, they will receive a 10 percent share of the profits and losses. 

The message here is simple for budding entrepreneurs: If you are interested in making an entrepreneurial debut, go for a silent partner. Still, with all factors considered, set clear boundaries prior to entering into a silent partnership.

Pros and Cons of having a silent partner

Apart from being able to retain complete control over your startup, finding a silent partner can also be much easier than finding a traditional investor or venture capitalist. For instance, your friend circle or family members can be your silent partners. These are the people we trust the most (and vice versa), and hence, there is not much convincing or negotiation to be done as in a traditional partnership. Furthermore, a silent partner can bring with them a great network of other potential investors or customers and thus, help your business grow.

An example of a silent partnership is Cascade Investment, which is funded by co-founder of Microsoft Bill Gates, becoming a silent partner of Water Street Tampa in 2014, a wellness community developed by Strategic Property Partners. The partnership helped expand the project to a much larger scale.

Nevertheless, there are also disadvantages of bringing in a silent partner as opposed to a traditional investor. For instance, some silent partners choose to be “silent” because they are not experienced in the sector your business is in. Besides, they might only want to earn passive income or invest in your startup as a show of support (such as in the case of friends or family being your silent partners). Hence, they might not offer you insightful advice to help your business expand. 

If you get a silent partner during the initial stages of your startup journey—consider yourself fortunate; it saves time and effort. In the case of traditional investors, entrepreneurs have to worry about addressing their concerns regularly. Instead, they can use that time to grow their startup.

Header image courtesy of Unsplash


Share on facebook
Share on twitter
Share on linkedin
Share on email


Elon Musk Buy Next

What Is Elon Musk Going to Buy Next?

There are moments in our lives—perhaps we are in the shower or struggling to sleep at 2 A.M.—when we think about all the ways we could influence the world. We find solutions to crypto volatility, world hunger and our neighbor’s ultra-dry plants.

5 Technologies

5 Technologies That Are on Stage in Russia’s Invasion of Ukraine So Far

On February 21, 2022, Vladimir Putin, President of the Russian Federation, declared the independence of the Donetsk People’s Republic and Luhansk People’s Republic. Arousing international outcry, this ignited the ultimate invasion of Russia on Ukraine three days later. While Ukrainians are still defying Putin’s covetous ambitions, new technologies have been floating on the surface to take advantage of each other.

Technology Joy Ghose

Technology Pioneers – Interview With Joy Ghose of FreeD Group

Over the past 15 years, the Chief Commercial Officer (CCO) of FreeD Group Limited, Joy Ghose, has accumulated plenty of experience in the travel and technology industry. Before joining FreeD Group, Ghose was involved in sales, marketing and management roles at companies like Merlin Entertainments and The Hong Kong Tourism Board.

Creamy Mattes and Beyond Reviewing GoPlay Cosmtics’ Custom Lipstick Maker

To Creamy Mattes and Beyond: Reviewing GoPlay Cosmtics’ Custom Lipstick Maker

While researching for our piece on personal color analysis, I came across the LIPSKIT, a custom lipstick-making tool created by GoPlay Cosmetics. GoPlay Cosmetics is a DIY (do-it-yourself) make-up brand that is looking to prioritize sustainability in the make-up industry without compromising the variety of your lipstick collection.

Ledger vs Trezor

Ledger vs Trezor: Where Should You Store Your Crypto Holdings?

As lucrative as the cryptocurrency world is, it comes with a high risk of losing your crypto because of hacks. To make sure that your crypto holdings stay safe with you, you must carefully choose effective storage solutions for them. One of the ways to keep your crypto secure is by holding it in a hardware wallet.