A silent partnership agreement is a legal contract between two or more partners or companies, in which one partner or company is known as a silent partner. The silent partner or the sleeping partner is mostly the investor, but do not take any part in the management area or daily affairs of the business. Mostly he is prohibited to take any important business decisions. He is mostly unknown to the clients. The silent partner share all the loses and benefits fully of the business, as the other partner.
Terms and Conditions of the Silent Partnership Contract
- A silent partnership is almost like other basic partnerships with few exceptions, which should be added in the form of conditions and provisions in the agreement in clear and simple words.
- Usually the silent partner provide capital money for the business, so the amount of money and the schedule of money installments should be mentioned in detail in the silent partnership agreement.
- It should be clearly stated that the silent partner is equally responsible for the losses or profits of the particular company.
- The agreement should declare the obligations and responsibilities of all the involved parties openly to avoid confusion.
- It should be stated as well that the silent partner has no right to interfere in the management area to avoid dispute.
- Authority of the working party should be recognized in the contract.
- Profit and loss percentage of each party or company should be decided in the contract.
- If the other party is also investing money equally or in a smaller portion, should be mentioned accordingly.
- The sleeping partner has the right to withdraw from the partnership, if it does not work.
- It should be cleared in the contract that no salary or compensation is recommended for the working partner.
- The provision of terminating the agreement in case of bankruptcy or death of any partner should be definitely added to the contract.
No doubt, it always help if you can get your hands with some real world contracts. On such source, could be to download high quality but free contract templates online.
Common Mistakes in Silent Partnership Contract
- Mostly silent partners do not have any experience, it’s better if they do not interfere in the business decision making affairs according to the contract.
- The provision of providing the money installments in due time should be added in the agreement.
- The partners with their names, particular status in the business and rights should be mentioned in the agreement in detail.
- Expectations and obligations is the area which should also be addressed very carefully.
- Provision of termination should be introduced in a fair and realistic way.
Tips for a Effective Silent Partnership Contract
- Every detail should be in the written form to have a safe business.
- Silent partnership agreement is a legal document, you must take guidance from a legal expert to avoid mistakes.
- Your first final copy of agreement should be checked by your legal attorney before anyone else.
- Real estate business is for sure profitable, for a person who wants to be a silent partner.