Tokumei kumiai is a form of business in Japan which can be compared most meaningfully to a "silent partnership" in the West. Limited partnership is the most similar American form of business. The tokumei kumiai is based on a contractual agreement whose terms require the "silent" or "limited" partners to contribute monetary or other assets to an "entrepreneur", who will manage them for an agreed business purpose. The silent partners and the entrepreneur then share, based on an agreed ratio, the profits (and, for silent partners, potentially the losses) derived from the entrepreneur's management of the business. In legal effect, the silent partners enjoy limited liability. Additionally, under Japan's tax treaties with several countries, distributions of profits from a tokumei kumiai have been given favorable tax treatment.
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