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What is a Silent Partnership Agreement?

If you are setting up a new partnership, or trying to bring in new investors as silent partners into an existing business, a Silent Partnership Agreement can help outline everyone's interest in a legally binding document. This agreement allows for the silent partner to share in the gains and losses of the venture while playing less of a role in day-to-day management of the company. The addition of a silent partner can be great for you and your business if the partner is capable of offering guidance as necessary and an infusion of capital.

When to use a Silent Partnership Agreement:

  • You're welcoming a silent partner to your company.
  • You are a Silent Partner entering into a business.
  • You manage a business that has silent partners.

Sample Silent Partnership Agreement

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SILENT PARTNERSHIP AGREEMENT

 

WHEREAS, the Partners desire to enter into a business partnership;

 

WHEREAS, the Silent Partner(s) showed an interest in joining the business venture silently and the General Partner(s) has accepted this partnership proposal;

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and conditions contained in this Agreement, the Partners to this Agreement agree to the following:

 

. PARTNERSHIP NAME, PLACE, AND BUSINESS

 

The business partnership will be known as (the "Partnership"). However, the business of the Partnership may be conducted, in compliance with all applicable laws, under any other name determined to be appropriate or advisable by the General Partner(s). The Partnership's primary place of business will be , , , . The Partnership's primary purpose is

 

. TERM

 

The Partnership shall commence on the Effective Date and shall continue thereafter until .

 

Contribution(s) will be submitted no later than .

. INTEREST ON CONTRIBUTIONS

 

No Partner's contribution to the capital of the Partnership shall bear interest in his or her favor. All interest earned on any contribution shall be payable in its entirety to the Partnership capital account.

 

. OWNERSHIP INTEREST IN THE PARTNERSHIP AND AUTHORITY

 

: %

: %

 

The Partners' authority will be defined by the following unless otherwise stated in the Agreement:

 

 

. DUTIES OF THE GENERAL PARTNER(S)

 

The General Partner(s) shall be responsible for the complete management, control, and policies related to the operation and conduct of the business, including all personnel, purchasing, sales, and contractual matters.

 

. DUTIES OF THE SILENT PARTNER

 

The Partners agree that the Silent Partner(s) shall be "silent" in the Partnership. The Silent Partner(s) are not restricted from engaging in any other business or from entering into any other partnerships.

 

 

The Silent Partner(s) shall not be personally liable for any debts or other obligations of the Partnership.

 

. PROFITS AND LOSSES

 

All Partners, including the Silent Partner(s), shall share all items of income, gain, loss, deduction, or credit equally. Profits and losses shall be computed in accordance with generally accepted accounting principles, consistently applied.

 

. LIMITED LIABILITY

 

Subject only to the provisions of the Uniform Limited Partnership Act applicable to the State, no Silent Partner(s) shall have personal liability of any kind for any debts, liabilities, or other obligations of the Partnership.

 

. ENTIRE AGREEMENT

 

Except as otherwise expressly provided in this Agreement, this Agreement contains the entire agreement of the Partners with respect to the terms and conditions of the Silent Partnership and supersedes all prior agreements, certificates, and understandings, oral or otherwise, among the Partners with respect to these matters.

 

. WAIVERS

 

Except as otherwise expressly provided in this Agreement, no purported waiver by any Partner of any breach by another Partner of any of his or her obligations, agreements, or covenants shall be effective unless made in writing subscribed by the Partner or Partners sought to be bound, and no failure to pursue or elect any remedy with respect to any default under or breach of any provision of this Agreement shall be deemed to be a waiver of any other subsequent default or breach, or any election of remedies available, nor shall the acceptance or receipt by any Partner of any money or other consideration due him or her under this Agreement, with or without knowledge of any breach under this Agreement, constitute a waiver of any provision of this Agreement with respect to that or any other breach.

 

. SEVERABILITY

 

Each provision of this Agreement shall be considered to be severable. If, for any reason, any provision or any part of a provision is determined to be invalid and contrary to any existing or future applicable law, the invalidity shall not impair the operation of or affect those portions of this Agreement that are valid, but this Agreement shall be construed and enforced in all respects as if the invalid or unenforceable provision or provisions had been omitted.

 

. COUNTERPARTS

 

This Agreement may be executed in one or more counterparts. Each counterpart shall be deemed for all purposes to be an original, but all of the counterparts together shall constitute but one and the same instrument binding on all Partners.

 

. SETTLING DISPUTES

 

All Partners agree to enter into mediation before filing suit against any other Partner or the Silent Partnership for any dispute arising from this Agreement or Silent Partnership. Partners agree to attend one session of mediation before filing suit. If any Partner does not attend mediation, or the dispute is not settled after one session of mediation, the Partners are free to file suit. Any law suits will be under the jurisdiction of the state of .

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by all Partners in the manner prescribed by law as of the Effective Date.

 

Signed this _______ day of ________________, 20____

 

 

By: Date:

General Partner

 

 

By: Date:

Silent Partner

 

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Silent Partnership Agreement FAQs

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  • Who is a silent partner?

    A silent partner is an individual whose main contribution to a business is in the form of capital. A silent partner is not usually involved in the partnership's day-to-day operations, hence the term "silent." Silent partners typically enjoy limited liability, and are exposed only to the extent of their investment in the business. Being a silent partner may be a great option for investors who want to enjoy the passive income generated from a growing business, but don't want to get involved in how the business is managed.

  • What should a Silent Partnership Agreement include?

    A Silent Partnership Agreement may include the following:

    • Information about the partnership, including name, place and purpose
    • Term of the partnership
    • Percentage of ownership in the business
    • Specific contributions to be made by each Partner
    • How additional contributions are handled by the partnership

    All of these terms and more are included in the Rocket Lawyer Silent Partnership Agreement.

  • How do I write a Silent Partnership Agreement?

    You can use the Rocket Lawyer Silent Partnership Agreement if:

    • You are welcoming a silent partner to your company.
    • You are a silent partner entering into a business.
    • You manage a business that has silent partners.

    The Rocket Lawyer document builder will help you create a custom Silent Partnership Agreement tailored to your needs.

  • Where can I get a Silent Partnership Agreement?

    You can create your own customized Silent Partnership Agreement with Rocket Lawyer. Choose your state and click on the Make Document button to begin creating your own document. You will be prompted to answer some questions about your agreement. Here are some questions for you to consider before you start your document:

    • Who's responsible for management?
    • What percentage of the business does the silent partner own?
    • How do you want to handle liabilities?
    • How do you want to handle profits?
    • Will the silent partner contribute anything non-financial?

    There are many important considerations, and they will have a lasting impact on your business. Establishing a Silent Partnership Agreement can help every partner, and the business, succeed for years to come.

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