Partnership can be made between two or more parties to join forces with the same business purpose. There are different types of partnership in business such as general partnership, limited liability partnership, etc. each has different types of arrangement as well which influence how the partnership works for all parties involved. Partnership is not limited to large business. It is a practice that is useful for even small business to grow and develop. Partnership is part of important structure in business that can help develop it into something more profitable and bigger.
About the types of partners in business
A business partnership is created when two or more parties come together for a particular purpose. In business partnership, there are what it calls silent partner and general partner. Both are different in characteristics and principles. Both are the most common that come into play when it comes to partnership structures. The things that can be influenced by the structure of both partnerships are profit, tax, losses, and responsibilities.
Silent Partners vs General Partners, Generally
As mentioned earlier that silent partners and general partners are different in some ways. Silent partners are more like active in the matter of investing or capital infusion. Meanwhile, general partners are active in business operations. Silent partners are seen to be the individuals who provide funding to a business. This type of partner can be found in Limited Liability Partnership. Their liabilities are limited to the money they invest. Some silent partners can also act as consultant in the business partnership or be a part of advisory board. Some business may create different setting for silent partners designation.
What General Partners Do
On the other hand, general partners are commonly found in Limited Partnership. The structures in limited partnership include limited partners as well as general partners. General partners are more active in business operation. They are designated with specific control to the operation, management, and use of the capital. Basically, general partners have control over the business entity in general. As mentioned before that general partners can also be found in limited partnership. They have liabilities which are limited to their investment. However, they also have full liability for partnership debt. Their personal asset can be seized if something goes wrong with the business.
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What Limited Partners Do
Things to remember about those types of partners are quite simple. Silent partners can be referred to as limited partners. They only provide capital to a business entity. They have expectation of the profit that will come from the business. However, they receive less control over business management or operation. Their involvement in that matter is indirect at least. Meanwhile, general partners are the opposite. They are the managers of the business itself. They have control over general business entity including the operation, management, as well as capital pool contribution.
Comparing two different partners above is possible but both have different characteristics. A business needs fun to be able to run properly. However, it is also good managers who can use the capital to the best of the business’s growth. A business can come with both silent partners and general partners if needed.