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Silent Partner Agreement for the United States

Silent Partner Agreement Template for United States

A Silent Partner Agreement is a legally binding contract used in the United States that establishes the terms and conditions between an investor (silent partner) who provides capital but maintains no operational control, and the active partner(s) who manage the business. This agreement outlines capital contributions, profit-sharing arrangements, liability limitations, and clearly defines the passive nature of the silent partner's involvement. It ensures compliance with both federal and state partnership laws while protecting the limited liability status of the silent partner.

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Silent Partner Agreement

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What is a Silent Partner Agreement?

The Silent Partner Agreement serves as a crucial document for businesses seeking capital investment without surrendering operational control. This agreement, commonly used in the United States, provides a framework for passive investment while maintaining clear boundaries between ownership and management. The document typically includes detailed provisions for capital contribution, profit sharing, liability protection, and exit strategies. Silent Partner Agreements are particularly valuable for businesses looking to expand without taking on traditional loans or giving up management control. They must comply with both federal and state partnership laws, securities regulations, and tax requirements, making them complex but essential documents for protecting all parties' interests.

What sections should be included in a Silent Partner Agreement?

1. Parties: Identification of the active partner(s) and silent partner(s), including full legal names and addresses

2. Background: Context of the partnership formation and silent partner's involvement

3. Definitions: Key terms used throughout the agreement

4. Capital Contribution: Details of the silent partner's investment amount and terms

5. Profit and Loss Sharing: Distribution of profits and losses between partners

6. Management Rights: Clarification that silent partner has no management rights

7. Liability Limitation: Scope of silent partner's limited liability

8. Term and Termination: Duration of agreement and conditions for termination

What sections are optional to include in a Silent Partner Agreement?

1. Buy-Out Provisions: Terms for buying out the silent partner's interest when partners want predetermined exit mechanisms

2. Death/Incapacity Provisions: Handling of partnership interest upon death or incapacity for succession planning purposes

3. Information Rights: Silent partner's rights to financial information and reports when additional transparency is needed

4. Non-Compete Clause: Restrictions on competitive activities when protecting business interests is crucial

What schedules should be included in a Silent Partner Agreement?

1. Schedule A - Capital Contribution Details: Detailed breakdown of initial investment

2. Schedule B - Profit Sharing Formula: Detailed calculation method for profit distribution

3. Schedule C - Business Plan: Overview of business operations and projections

4. Schedule D - Partner Information: Detailed information about all partners including contact details

5. Appendix 1 - Valuation Method: Agreed method for valuing partnership interests

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Document Type

Agreement Contract

Cost

Free to use
Clauses


























Industries

Securities Act 1933: Federal law governing securities offerings and registration requirements, particularly relevant if the partnership interest might be considered a security

Securities Exchange Act 1934: Federal law regulating secondary trading of securities and establishing SEC oversight, applicable to partnership interests that qualify as securities

Investment Company Act 1940: Federal law regulating investment companies and funds, may be relevant depending on the partnership's investment activities

Internal Revenue Code: Federal tax regulations specifically dealing with partnership taxation rules, income allocation, and tax liability distribution

Uniform Partnership Act (UPA): State-level legislation providing framework for partnership formation and operation, adopted by many states

Revised Uniform Partnership Act (RUPA): Updated version of UPA adopted by many states, providing modern framework for partnership governance

Blue Sky Laws: State-specific securities laws governing the offering and sale of securities within each state

SEC Regulations: Federal regulatory requirements regarding private placements, securities registration exemptions, and disclosure requirements

Limited Liability Protection: Legal framework ensuring silent partner's protection from partnership liabilities beyond their investment

Fiduciary Duty Laws: Legal obligations regarding duty of care, loyalty, and good faith between partners and to the partnership

Partnership Tax Regulations: IRS rules specifically governing partnership taxation, including income allocation and distribution requirements

State Business Codes: State-specific laws governing business formation, operation, and dissolution

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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