Active Partner

Your passive partner just gave you a few hundred grand to open your Singing Lawn Mower store. They're passive because they have nothing to do with tuning the mowers, sharpening their blades, loading in riffs from Adele, The Stones, and The Eagles, and they don't sell to customers. They just gave you the money, left, and went off to play golf all day.

An active partner either gave you money directly, or has sweat equity in some form, and actually helps you run the business. Because they are active, should one of those singing lawn mowers listen to too many angry Kelly Clarkson songs one day and decide to eat feet, the active partner has unlimited liability, as opposed to the passive partner who was just a remote investor.

The definition of active partner is broad, but it can involve as little direct daily touch with the business as simply being on the board of directors, or it can refer to the CEO of the company. So when you think passive, think public shareholder, or non-board member private investor, and when you think active, think: playing mellow songs on the mowers when you're selling them.