Difference between Silent Partner and General Partner

Silent Partner

A silent partner is defined as any individual who contributes in terms of funding for a business but does not want to engage in any business-related activities. The partnerships and limited liability companies are the ones that are allowed to have silent partners. These partners are also referred to as the limited partners in a company.

It is important to understand that in a partnership that is designated as a limited partnership, the total liabilities of a silent partner are only limited to the actual amount of money or property that they have invested in the firm.

In a limited liability company, the partnership agreement will help to provide details on the total liabilities of silent partners. In many of the cases, these silent partners may also act as the consultants through the advisory board or through other situational settings that are designated by the firm. The contribution of silent partners is also very important for a business as it helps them to acquire capital for the day to day operations of a business. Many partnerships and limited companies also prefer such partners who make sure that the business runs smoothly in the long term. Thus it is important for any business to seek out such partners and make sure that their needs are addressed properly.

General Partner

A general partner is typically designated with the control over several areas of a business that include but is not limited to operations, management and the use of capital within a business entity. These partners are also most commonly found within a limited partnership structure. General partners within a limited partnership, however, have total liability in terms of the partnership debts of a firm.

In case a business gets liquidated, a general partner may have to bear liability that can extend to their personal assets as well. The creditors will have the option to seize or liquidate the personal assets of a general partner so that they can pay the creditors and also satisfy the corporate debts of the firm. The partners need to make sure that the needs of these partners are met in an adequate manner and encourage them to play an active role in the business.

The general partners can also be found in a limited liability company. It can also have a broader flexibility to help structure the total partnership details with the help of a partnership agreement. Under any limited liability company structure, the owners or investors of a firm are typically the designated members of that business. General partners have a very important role to play in the business, and their contribution to running the company is vital for its success both in the short and long term.

Difference between Silent Partner and General Partner

Both silent and general partners are needed for the efficient working of any business. Their contribution helps to keep the business up and running in the short as well as long term. However, there are some major areas of difference between silent partner and general partner, and it is important for the students to focus on these points mentioned below to get a better understanding of the topic:

Conclusion

There are a number of areas of difference between silent partner and general partner. But it is a known fact that both of them are extremely crucial for the successful running of a firm. Every business designation has its own liabilities, requirements and tax codes that will vary according to the state, local or federal laws. These partners also contribute with their expertise which is required to help a business grow and diversify in the future.

Also See:

• Mcq on Retirement and Death of a Partner
• Change in Profit Sharing Ratio Among the Existing Partners
• Modes of Reconstitution of a Partnership Firm
• Disposal of Amount Due to Retiring Partner
• Reconstitution of a Partnership Firm Admission of a Partner