We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is an Active Partner?

By Alex Newth
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

An active partner, also known as a participating business partner, is an investor who actively works in the business partnership, helping with day-to-day management. This is the more common type of partnership, and one of the simpler ones to create. Profits, losses and responsibilities are equally shared between the partners, and the partnership is not taxed as a business. In contrast to an active partner is a limited partner; in addition to requiring more paperwork, a limited partner experiences restrictions on his or her power and profit sharing.

When two or more people or entities come together in an active partnership, they all agree to a general partnership. This means that, while not specifically measured, each partner will divide the responsibilities of the company and manage with equal power. Along with sharing responsibility, all losses and profits also are shared. The profits and losses normally are shared equally, but partners also can specify while completing the partnership-forming paperwork to only share in part of the profits and losses.

Compared to other partnership ventures, an active partner combination requires a relatively small amount of paperwork. This is because most of the business aspects are divided equally, so there is no reason for more complicated paperwork outlining who is in charge of what. A legal agreement must be signed between all partners, stating that they each own an equal portion of the business.

The partnership is not taxed like a normal business at tax time. Instead, each partner is responsible for filling out a personal return, detailing the profits and losses experienced by that partner. This is in contrast to how a business files a tax return as one conglomerated entity.

The darker side of joining a partnership is that one partner also is responsible for the other partners. For example, one active partner makes a loan but cannot repay it because the partnership is not doing well. After all of that partner’s assets are taken and money remains to be paid, the bank will penalize the other partner, even if he or she did not personally make the loan. While the profit is shared, so is all the loss and negligence.

A limited partner is in contrast to an active partner. This partner invests money into the partnership but only has limited power and limited profit sharing. Some agreements also will state that this partner has limited liability for losses or legal suits. This describes people who are interested in investing in a new partnership but are not interested in running the partnership.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.