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Silent vs. General Partners Explained

Each business designation has different requirements, liabilities, and tax implications according to various laws. Silent partners typically only contribute capital to a business through investment, while general partners actively manage operations. Silent partners, also called limited partners, have limited liability up to their investment amount in a limited partnership or as outlined in an LLC agreement. General partners control management, operations, and capital use and have full liability for partnership debts if the business fails.

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87 views1 page

Silent vs. General Partners Explained

Each business designation has different requirements, liabilities, and tax implications according to various laws. Silent partners typically only contribute capital to a business through investment, while general partners actively manage operations. Silent partners, also called limited partners, have limited liability up to their investment amount in a limited partnership or as outlined in an LLC agreement. General partners control management, operations, and capital use and have full liability for partnership debts if the business fails.

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jayreniel
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Each business designation has its own requirements, liabilities, and tax code

which can vary according to local, state, and federal law. Generally, silent vs.
general partners (GPs) will most commonly come into play when dealing with
partnership and/or LLC structures. Both partnerships and LLCs can differ in
terms of how profits, losses, and responsibilities are distributed to each
participating partner. Partnerships and LLCs can also be combined and
structured in a variety of ways. Typically, silent partners are known to only
contribute to the business by way of capital infusion—that is, investing money
in the business entity—while a general partner is an active manager in
business operations.

Silent Partners
Silent partners are investors. A silent partner is any individual who provides
funding to a business as his only contribution. Partnerships and LLCs can
have silent partners. Silent partners can also be referred to as limited partners
(LPs).

In a partnership designated as a limited partnership, the liabilities of the silent


partner are limited to the amount of money or property that they invest. In an
LLC, the partnership agreement will provide details on the liabilities of silent
partners. In some cases, silent partners may act as consultants through an
advisory board or some other situational setting as designated by the
business.

General Partners
A general partner is most commonly found in a limited partnership structure.
Limited partnership structures include both limited partners and general
partners. General partners are typically designated with control over the
management, operations, and use of capital within the business entity.

As mentioned, the limited partner makes investments into the business or


investment vehicle and his liabilities are limited to his investment. General
partners in a limited partnership, however, have full liability for partnership
debts. If the business goes under, a general partner may have his personal
assets seized or liquidated to pay creditors and satisfy corporate debts. If the
general partner is itself a business, then the business could be liable for debts
beyond just their investment.

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