A partial owner in a company who provides investment capital and receives profit share but does not manage the business and remains protected by limited personal liability. Also referred to as a “silent partner.” If a company boasts at least one limited partner, it must also benefit from at least one general partner.
Limited partners technically serve as part-owners in a company but their influence is primarily financial in nature. Unlike general partners, limited partners cannot manage the everyday affairs of the business and are generally not allowed a vote in re: material business matters. As their interest is primarily financial (and they therefore cannot reasonably be held accountable for decisions they had no hand in), their potential personal liability for business debts and judgments is insulated. All a limited partner usually stands to lose in terms of a company’s success or failure is the amount of money they invested in the business. The money a limited partner makes in association with the business is taxed as passive income.
Adult Son: “Dad, I’d like to ask you to be a silent partner in my business.”
Dad: “Oh, alright.”
Adult Son: “Seriously? Don’t you want to see my business plan or learn anything about my startup before you invest your money and become part owner? You wouldn’t run the business day-to-day or anything, but still!”
Dad: “I’ve been a silent partner in my marriage to your mother for 30 years now. I know my way around, son.”