An active partner is an invested person who is involved in the daily operations of the partnership. An active partner helps run the business to enhance his or her returns and is therefore considered a material participant.
So a passive partnership is one where there is a limited partner who is pretty much making the investment, staying informed, but not making the day-to-day decisions. And the day-to-day decisions are made by the general partner, who is the more active partner
A sophisticated investor is a classification of investor indicating someone who has sufficient capital, experience and net worth to engage in more advanced types of investment opportunities.
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