Silent Society

Meaning of Silent Society


As a rule, a silent partner gives assets and the whole thing then means that a community relationship has been established. There are even legal bases in the Commercial Code, because the silent partner naturally also wants to benefit from his contribution. On the other hand, he has no obligations and therefore keeps out of business. Furthermore, he has no separate powers and no say in the matter.

How is a silent society founded?

In companies or other institutions there is a main shareholder who can enter into an informal contract with a silent partner. However, in this contract, as in other contracts, details must be recorded.

This concerns, for example, the level of participation, but also the losses, because they too have to be borne. Unless this clause was stipulated when the contract was concluded in such a way that this was excluded. If there is a profit, the silent partner will definitely participate.

If a silent partner is involved in a business, according to the Commercial Code, his contribution is to be posted to a deposit account. The partner can either give his money to a corporation, a partnership or to a sole trader.

Does a silent partner also have rights?

The silent partner has control rights, which, however, only apply to a limited extent; he is not entitled to a say. Of course, he can look at the books at any time to find out about the profit or loss.

When concluding a contract, it can also be determined whether the partner still has special rights; However, this is the exception, because the silent partner is usually only a financier.

What’s so special?

In contrast to other partners , no entry in a commercial register has to be made, which means that a silent partner can remain completely anonymous. Without appearing by name anywhere, he profits only from the profit of a business.

It is important that he does not have a say, but only invests a certain amount, unless otherwise contractually regulated. The disadvantage here is that he can only give his money if there is one hundred percent trust. On the other hand, he must reckon with the fact that he may suffer a high loss.
A silent partner is particularly in demand by medium-sized companies, because for them this is a good alternative to getting money if it is not supposed to be a bank. The financing is regulated and contractually agreed between the two parties alone. How the capital can be used does not have to be contractually regulated.

The termination relationship

Of course, a silent partner can also end his participation, but there are different options for doing this. According to Section 230 (1) of the German Commercial Code (HGB ), a silent partner participates with a contractually agreed capital contribution. When it comes to tax law, a distinction must be made.

There are two forms of quiet society, the typical and the atypical. The typical society is when the partner does not participate as a co-entrepreneur, the atypical one means that he bears a co-entrepreneurial risk. This in turn means that he not only typically participates in the profit, but also in the loss of a company or another company.

If a typical company is terminated, this can have various tax consequences. Usually, however, terminating a contract is not a problem, because the entire deposit and, in quite a few cases, a severance payment is also paid. However, it always depends on how the social contract was formulated.
In this case, income tax is actually only about the amount that is to be regarded as a severance payment, not about the normal contribution. In terms of tax law, this is referred to as a “special fee” that is of course taxable.

A silent partnership can also be terminated if the participation is sold elsewhere, for example to a relative of the partner.

Quiet society can also be dangerous

If a company is looking for a way to get money and no bank should be involved, a silent partner is the person who can save it. Thanks to the contribution, insolvency can also be temporarily averted if the shareholder has of course been informed in advance.
Depending on the liquidity situation, a silent partnership can also be used to finance a business start-up. However, the shareholder must be aware that he can also lose his money, unless this has been contractually regulated.
A capital contribution can refer to money, but also in kind or even a service. Since the silent partner remains anonymous in any case, it is not possible for outsiders to see whether the company has a partner in the profits. In return, a silent partner has little or no say.
Experts advise that a silent partner should choose the atypical form, because then he can request insight into business documents and books and will also have a share in the assets. In typical society, he also has to share losses and his income has to be taxed. If a loss is to be feared, it cannot be deducted from any advertising costs.

The advantages of a silent partner

  • There is no entry in a commercial register
  • The shareholder can increase his equity
  • He can grant a contribution named by him
  • The partner remains completely anonymous
  • There are still no costs related to securities
  • There is a freely selectable form of contract

The disadvantages of a silent partner

Of course, there are also disadvantages for a silent partner, which would be:

  • A company can make itself dependent on a shareholder for the financial side
  • The partner does not appear publicly and therefore does not have to disclose any losses
  • A shareholder can also totally ruin himself financially (risk of total loss)

The contract

The contract that is concluded with a silent partner should contain the following points:

  • Under point one, the company that receives a contribution and the partner are listed. Both give not only their full name, but also the exact name


  • The amount of the expected deposit follows under point two
  • Point three lists whether the silent partner has a say
  • The following are the basics of profit sharing and whether or not loss sharing is excluded
  • Point five should include whether the shareholder receives an annual list of the balance sheets and whether he is entitled to have this checked if necessary
  • The 6th point should indicate a duration of the relationship, if this can be determined.

Silent Society