INVESTING IN BUSINESS

A small business needs funding to
start operating. Many small business
owners invest their own money into
their businesses, or seek out active
partners to invest and help run the
business. However, some business
owners seek silent partners. A silent
partner invests in the business, but
does not handle the day-to-day
operations. Becoming a silent partner
has several advantages.
Passive Income
As a silent partner, you invest money
into a business. You can earn a return
on that money when the business
makes a profit. Partners, even silent
ones, share in the income brought in
from a business. The amount of
income you make will depend on how
well the business does and what
arrangement you have with the other
partners. For example, some silent
partners may make a smaller share of
the profits than more active partners,
especially if you invest less in the
business than others.
Less Responsibility
Small business startups typically
require a lot of work, with many long
hours and periods of uncertainty.
Active partners must devote a good
portion of their time to getting the
business up and running. They must
make crucial decisions, and often
have to deal with difficult situations,
such as hiring and terminating
employees. As a silent partner, you
have less of a responsibility to the
operations of the business. A silent
partner does not involve himself in
the daily operations of the business,
so your investment in the company
may come with less stress and hassle.
Easier Investments
An active partner in a small business
must work hard to make sure the
business succeeds. Most active
partners have a deep knowledge of
the industry and understand how to
market their type of business
successfully. As a silent partner, you
can invest in a small business even if
you do not fully understand the
industry, since you will have little
involvement in the business itself. This
will give you more freedom to choose
the investments you want, as you do
not have to limit yourself to industries
where you have experience.
Warnings
While you can sign on as a silent
partner without much experience -- if
you have the funds to do so -- you
should take care to measure the risks
of any large investment. You will also
share in any losses. Protect yourself by
researching the company and the
other partners involved before
investing large sums of money.