A partner involved in day-to-day operations that keep a business running. This person shares the same risk of profit or loss as their partner company.
Active Partner Details
A partner is simply a person, or sometimes an organization, that works together with another and shares profits, but not all partnerships play out the same way. In business, many different types of partnerships take place. Some are more common than others, but you will find a partner involved in almost every company.
There are sleeping partners, partners in profit, minor partners, nominal partners, etc. As the name suggests, an active partner is a partner who is actively involved in running a business. They are involved in the daily works and have significant responsibilities.
Active partners take care of specific tasks throughout daily operations; these tasks depend on what role the active partner has taken when first involving themselves with the company. It could be a director of advertising, an executive or directorial role, etc. In whatever case, these roles have a high impact on the performance and success of the company.
Example of Active Partner
Some companies do not have all of their management roles filled and often decide to fill those roles with active partners. Let’s say Company A has grown in recent years, and the higher-ups have become way too busy and have a hard time keeping up with their work.
As a result, they decide to accept partners to ensure that the company doesn’t fall behind. So then, an active partner becomes involved. All losses and profits are shared equally, so the company and active partner equally divide the paperwork to get the partner involved.
Thanks to holes being filled by, this makes the probability of subordinate employees rising to better positions higher. From then on, anything that becomes of Company A will directly affect the active partner and vice versa. The active partner is now involved in daily operations and is essentially a part of management. If the partner does well, so does Company A, and if they act poorly, it will negatively affect them.
Significance of Active Partner
Being an active partner comes with more risk than any other type of partnership, meaning that they can be held liable for a lot more than, let’s say, a sleeping/silent partner. Since the active partner is a more hands-on job, they are held just as responsible if a partner happens to commit any illicit actions. If an active partner wishes to retire, they must first give a public notice. If they don’t and retire anyway, they would still be held liable for all actions that occurred even after their retirement.
Being an active partner means that much of what happens is out of your control. For example, if an active partner borrows money from another company, they need to pay the company back. However, because of the poor actions of the company’s management, money is tight, and by the time they need to pay the money back, they can’t afford to because it’ll put them on red numbers.