Alternative to credit: silent participation

Do you want to grow and need capital in the short term? Then a silent participation could be an interesting solution for you. You can find out what advantages this form of financing offers here.

You cannot see him and his name does not appear in any commercial register. This is typical of a silent partner. He gives your company money and shares in the profits. It’s different with a loan. The debt capital is visible on your balance sheet. You pay the agreed interest in any case – no matter how well the business is doing.

 

What are the advantages of silent participation?

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  • The partner is only known to you.
  • It doesn’t tell you how to run your business.
  • The participant’s contribution counts as equity. This makes borrowing easier.
  • The profit paid out is considered a business expense. You can deduct it from tax.

 

What scope do you have for design?

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The German Commercial Code gives you great freedom in structuring a silent participation. You don’t even have to draft a written contract. This is still recommended. Your partner has the right to profit sharing. He can also check your annual accounts. It is unusual for the silent partner to have a say in corporate management. You can freely agree the amount of the equity participation, term and any minimum interest with the silent partner. Unless otherwise expressly stipulated, the silent partner is liable with his entire contribution. In the event of bankruptcy, he can completely lose his money. A silent partner will only take this risk if the prospects for profit are correspondingly high.

 

Who can become a silent partner?

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Whether a private individual or a company – in principle any silent partner who has the capital can become one. The money often comes from the private environment of the company owner. The spouse, children or other relatives support the family business. A special form: You involve your employees in your company. This is good for your image as an employer and binds the employees. However, many company owners fear the obligation to provide detailed information about the company’s success. Wrongly: You can avoid this by granting the participation as profit participation rights or participatory loans.