Partnership Agreement Template

What Is a Silent Partnership Agreement?

A "Silent Partnership Agreement" is a type of Partnership Agreement that is signed between partners when one wants to invest in a business and receive profit but has no desire to participate in running the partnership. A silent partnership consists of:

1. Managing partners (or general partners). These are the partners that do the managing duty.
2. Silent partners (or limited partners). These partners invest in the partnership but do not manage it.

This type of partnership has a few drawbacks. It does not give the silent partners the right to run the partnership (unless they were granted voting rights by managing partners). In addition to this, silent partners not only carry the profit of the business but its losses as well. Nevertheless, the income that silent partners receive in this case is not subject to a self-employment tax (since silent partners are not employees). While the liability of a limited partner is narrowed to the amount they invested in the partnership, a general partner's liability is unlimited, and if the partnership will end up in a tough situation, they might lose everything, including their personal assets.

How to Make a Partnership Agreement?

Before writing the agreement, the partners should discuss everything they would like to include there. Each statement should be examined to make sure that the legal language is clear for all of the involved parties. Usually, a Partnership Agreement should include sections, such as:

1. Information About the Parties. In the first part of the document, the parties should enter their full names and addresses for identification purposes. The addresses can include country, state, city, street name, and building number.
2. The Subject. Parties use this section to express their intention to conduct a partnership. They agree to set the terms and conditions that will govern their partnership and confirm that these statements are made under the consent of all parties.
3. Information About the Partnership. Here, parties give a full description of their partnership. They should designate its name, type (general, limited, etc.), purpose, beginning date, location, and other important features they would like to include.
4. Capital. In this part, the parties can state how they will form the partnership's capital. In addition to designating how much every partner will invest, both in a percent and cash amount, they should also state if the withdrawal of their capital contribution is possible and under which terms, how the financial decisions will be made, information about audit and capital accounts, etc.
5. Management. This section of the agreement is supposed to determine the management system of the partnership. How the business decisions will be made, who will make them, whether parties will have separate duties or all decisions will be made by voting, etc.
6. Meetings. In order to control the partnership, the parties are supposed to have regular meetings. Here, they should state how often the meeting will be held, how to call a meeting (if one party needs to resolve an issue), where it can be held, and other aspects connected with it.
7. Partnership Termination. Parties can use this section to state how and when the partnership will be dissolved. If they do not describe the procedure or state otherwise, then the partnership is supposed to be terminated by a Partnership Dissolution Agreement signed by its partners.

Parties can include other sections in the document, such as governing law, jurisdiction, amendments, definitions, indemnification, contact information, etc.

Related Agreements and Contracts:

• Profit-Sharing Agreement;
• Partnership Dissolution Agreement;
• Notice of Withdrawal from Partnership.