Small Business Investing

Investing in a Small Business

Why is it good to be a “silent partner” in a business?

There are some distinct advantages to being a silent partner when you make an investment in a private business. Assuming you paid the right price for the equity, and assuming you have very good, aligned, competent management in place to run the day-to-day operations, many think being a silent partner is a great choice. It allows you to play a supporting role in managing the company on an as-needed basis, and greatly limits the amount of time you must devote to the business, so that you can focus on other projects and investments. According to experts interviewed by The Houston Chronicle, acting as a silent partner allows you to step out of the way of competent, knowledgeable partners, yet share in the income/benefits generated by the company without the daily operational hassle. An active partner may earn a management fee as compensation for his time. A company may also create a compensation scheme in which the passive partners earn less and the active partners earn more.


This is a web preview of the "The Handy Investing Answer Book" app. Many features only work on your mobile device. If you like what you see, we hope you will consider buying. Get the App