A dormant partnership exists if someone participates in the trading activities of a merchant with a capital contribution. The silent partner participates in the profits. In contrast to the other companies, no joint company assets are formed, but the contribution is transferred to the ownership of the active partner. The dormant partnership is not recognizable from the outside and the dormant partner does not register a business.
Since the silent partner does not become a partner in the trading company in which he/she has a silent participation, he/she is neither entitled nor obligated by legal transactions of the trading company with third parties. The silent partner is entitled to limited rights of control, has a share in profits and losses, but is not personally liable for the company’s liabilities. In contrast to profit sharing, which is mandatory, loss sharing is abdicable. After dissolution of the company, the silent partner is entitled to payment of his credit balance. If the (typical) legal regulation is deviated from, an atypical dormant partnership exists, e.g. if the dormant partner is granted more control rights, the dormant partner becomes involved in the management of the company, etc.