Legal Definitions - partner

A partner is an individual who shares ownership in a business, known as a partnership, with one or more other people. Partners typically contribute resources, such as money, property, or expertise, and agree to share in the business's profits and losses. They often have the authority to act on behalf of the partnership, meaning their actions can legally bind the entire business.

There are generally two main types of partners:

• An active partner (also called a general partner) is deeply involved in the day-to-day management and operations of the business. They make strategic decisions, oversee staff, and are typically fully liable for the partnership's debts and obligations.
• A silent partner (also known as a limited partner) primarily contributes capital or other assets to the business but has little to no involvement in its daily management. Their liability for the partnership's debts is usually limited to the amount of their investment. While they may offer advice, they do not typically participate in operational decisions.

Examples:

• Example 1: Professional Service Firm
  Sarah and David, two experienced architects, decide to open their own design studio together. They both contribute initial capital, share office space, and actively work on client projects daily. They jointly make all major decisions about the firm's direction, hiring, and finances.

  Explanation: Sarah and David are active partners. They co-own the business, share profits, and are both fully involved in its daily operations and management. Their actions can legally bind the firm to contracts with clients or suppliers.

• Example 2: Restaurant Investment
  Maria wants to open a new farm-to-table restaurant but needs additional funding. Her friend, Robert, believes in Maria's culinary vision and invests a significant sum of money into the restaurant. Robert does not work in the kitchen, manage staff, or handle daily finances; he simply provides the capital and receives a share of the profits based on their agreement.

  Explanation: Robert is a silent partner. He has invested in the business and shares in its profits, but he is not involved in the day-to-day management or operations of the restaurant. His primary role is financial support, and his liability for the restaurant's debts is typically limited to his investment.

• Example 3: Tech Startup
  Alex and Ben develop a groundbreaking mobile application. Alex is the lead developer, handling all the coding and technical architecture, while Ben focuses on marketing, user acquisition, and securing venture capital. They jointly own the company, share responsibilities for its growth, and split any profits or future sale proceeds.

  Explanation: Alex and Ben are both active partners. They each contribute their unique expertise and are actively involved in different, but equally crucial, aspects of the business's daily operations and strategic direction. They share both the ownership and the active management duties.