How to Become A Successful Investor - Becoming a Silent Partner

Updated: Feb 7

Many business savvy individuals have considered the thought of becoming a silent partner at one point or another in their careers. The thought of investing in a lucrative business and sharing in the profits without any additional effort is an interesting proposition to seriously contemplate.

Fundamentally, a silent partner is an individual who invests capital in a business in exchange for a share in the profits or losses of that business. Silent partners aren't supposed to have a part in the day-to day operation of the company, and that's where the term silent originates from. They do, however, have a say in anything that affects the management of the business because management and its choice of direction is the reason behind the partnership in the first place.

Advantages of a Silent Partnership

There are various benefits which are available to a silent partner that don't exist for other members of the company.

  • Silent partners have little to no liability with regards to the operation of the company on a daily level.

  • Silent partners are usually brought into a company due to their financial resources, not their knowledge of operations of the business.

  • Knowledge of investing is not necessary; A detailed knowledge of investing isn't a priority when becoming a silent partner either.

Obviously, due diligence must be completed by the investor by thoroughly examining the company's history in addition to their profit and loss statements and potential future market, but a specialised knowledge of investing isn't necessary to become a successful silent partner.

Why do people become silent partners?

More often than not the primary reason individuals become silent partners is the capability to enjoy a passive income stream without having to continuously monitor an investment.

The essential basis of a silent partnership is trust in the individual or group that's running the company. Once trust in the capabilities and direction of the business is established, there's very little other liability for a silent partner other than to enjoy the profits generated by the business.

Be Wary

The key to being a successful silent partner is to completely evaluate all the aspects of the business prior to committing to the investment. Even the most brilliantly managed businesses can come up against problems that might hinder their growth or cause unseen difficulties.

When these situations arise, the common instinct for silent partners who have considerable amounts of capital invested in a company is to overreact and try to involve themselves in the operational aspects of the business in order to correct the situation. This often leads to difficult situations where the silent partner oversteps the limits of their role in the partnership and creates a dysfunctional scenario in the operation of the business.

Becoming a Silent Partner

There are many opportunities available these days to become a silent partner. Global Investor Group provide opportunities regularly to become involved in our Capital Projects.

To get in touch email for more information.