Investing quietly: Typical and atypical silent partnerships for startups

Silent partnerships: Typical and Atypical

Silent partnerships are a popular form of investment in companies. They offer investors the opportunity to invest their capital in a company without being actively involved in its management. However, there are two types of silent partnerships: typical and atypical. This blog post explains the differences between the two types of silent partnerships.

Typical silent partnership

A typical silent partnership is an investment in which the investor participates only in the profits of the company. He has no say in the management and is not liable for the debts of the company. The amount of participation is usually fixed and cannot be changed. Typical silent partnerships usually have a fixed term and the investor has no influence on the management.

Atypical silent partnership

An atypical silent partnership is an investment in which the investor also participates in the loss of the company. The investor also has a say in the management and can make decisions that affect the company. In contrast to the typical silent partnership, the investor in an atypical silent partnership can be held liable if the company has debts. The amount of the participation may vary and atypical silent partnerships may be open-ended.

Advantages and disadvantages

Typical silent partnerships offer investors a way to put their capital into a company without having to worry about management. They are also not liable for the debts of the company. Atypical silent partnerships offer investors more influence on management and the opportunity to make decisions that affect the company. However, they are also associated with a higher risk, as the investor also participates in the loss of the company and can be held liable

Connection with business angel concept

Silent partnerships can also be interesting for young startups, game developers and esport teams, as they can be well combined with a business angel concept. Business angels are experienced investors who support and advise startups and young companies. They can offer investors in a silent partnership valuable advice and contacts to make the company successful. By combining silent partnerships and business angels, young companies can benefit from the financial support and expertise to build and grow their business.

Tax aspects

When choosing between a typical or atypical silent partnership, the tax aspects should also be taken into account. The different types of investments are each assessed differently for tax purposes and may affect the investor’s tax burden. It is therefore advisable to consult a tax advisor to understand and plan for the tax implications of the investment. A tax advisor can also help determine the best structure for the investment to minimize the tax burden.

Advantages and disadvantages of the typical silent partnership

Advantages:

1. No say in the management: The investor does not have to worry about the management and can concentrate on his investment.
2. No liability for debts: The investor is not liable for the debts of the company and thus bears no financial risk.
3. Fixed term: The term of the investment is fixed, which gives the investor a certain degree of planning security.
4. Fixed amount of participation: The amount of participation is fixed and cannot be changed, which gives the investor a clear idea of his investment.
5. Simple structure: The typical silent partnership has a simple structure, which facilitates management and implementation.

Disadvantages:

1. No say in the management: The investor has no say in the management and thus cannot actively participate in the development of the company.
2. No influence on decisions: The investor has no influence on decisions affecting the company, which can lead to frustration.
3. No possibility to influence the company: The investor cannot influence the company to protect or improve his investment.
4. No flexibility: The amount of the investment and the term are fixed, which gives the investor no flexibility.
5. No possibility to increase profits: The investor cannot actively contribute to increase the profits of the company.

Advantages and disadvantages of the atypical silent partnership

Advantages:

1. Right to a say in the management: The investor has a say in the management and can thus actively participate in the development of the company.
2. Influence on decisions: The investor has influence on decisions affecting the company , which gives him more control.
3. Possibility to influence the company: The investor can influence the company to protect or improve his investment.
4. Flexibility: The amount of the investment and the term can vary, which gives the investor more flexibility.
5. Opportunity to increase profits: the investor can actively contribute to increasing the company’s profits

Disadvantages:

1. Liability for debts: The investor can be held liable in the case of an atypical silent partnership if the company has debts.
2. Higher risk: The atypical silent partnership involves a higher risk, as the investor also participates in the loss of the company.
3. More complex structure: The atypical silent partnership has a more complex structure, which can make it more difficult to manage and implement.
4. Unclear responsibilities: The responsibilities between investor and management may be unclear in the case of an atypical silent partnership.
5. Conflicts with other investors: In the case of an atypical silent partnership, conflicts may arise with other investors who have a different idea of the company’s development.