The Problems With Silent Partners – And The Threat of Business Partnership Disputes

Unfortunately entrepreneurial flair is not the only thing required in the start up of a new business! Obviously a capital is also required, this is where many people find themselves turning to relationships with silent partners.

Having a business partner who will invest in your idea and leave you to get on with it may seem like a dream come true, but this is never the case. People with money to invest didn’t come by it by accident – they will be a shrewd investor who will expect their investment to make money for them.

To avoid partnership disputes with a silent partner, everyone involved must be clear about where they stand from the outset -and that involves getting the right legal advice and the right legal documentation at an early stage. Responsibilities and duties should be clearly defined, so that any misunderstandings which may occur later and lead to a partnership dispute can be avoided. Both parties will have clear objectives. The silent partner is not just a Father Christmas figure, and will want to see that their investment is managed properly. At the same time, the other partner will need to make sure that they have sufficient funds to start the business on a professional footing and have a surplus to see them through slow trading periods.

It must be understood at the outset that the silent partner will be just that, and the daily running of the business will be left to the partner who has the skills to make the business work and grow.

These points, and many others, should be discussed to avoid partnership disputes. The investor, or silent partner, will need to be assured that his or her capital investment is being managed in a professional manner, and will show a profit. The other partner will also need to make the business grow, so that they can make a living wage and satisfy the silent partner’s investment.

All partners should look the big picture: a bad month or a bad week may be just that, and this may have nothing to do with the overall state of the business. If any partnership disputes do arise, all partners should discuss them together. For the right needle advice, talk to a specialist business law solicitor, to resolve any partnership disputes, which may lead to a partnership dissolution and the end of the business -not to mention the end of the dream which everyone involved had at the beginning. Impartial legal advice costs less than proceeding without it.