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Download partnership agreement template in Microsoft Word format.
Understanding a Limited Partnership Agreement
Some businesses have general partners and limited partners. The general partners own the business and are individually responsible for the liabilities of the business. Limited partners on the other hand are not liable for the debts of the business and their liability is limited to the amount they have invested in the business. Limited partners however will not have management authority and therefore will remain silent partners. A limited partnership agreement is required when businesses invite this class of partners to join in and invest in the business.
A limited partnership agreement will outline the responsibilities and rights of all the parties to the agreement. The structure and content of the agreement are not that simple, and most people would want to engage the services of a legal professional specializing in business law.
The duration of a limited partnership agreement can be for several years or limited to a specific project or an event. The major purpose of inviting limited partners into a business is to find additional capital for the business. Therefore, this agreement will exhaustively deal with the capital being brought in by the limited partners and the scope for contributing additional capital. However, in businesses where the amount of capital contributed determines the authority to mange the business, adequate care should be taken by the general partners while determining the quantum of additional capital invited from the limited partners.
Similar to the treatment for capital, distribution of profits is another area of major concern in a limited partnership agreement. In most instances a relationship to the capital contributed is established but this need not always be the case. This agreement will also deal with the duties and responsibilities of each general partner managing the business at great length. Compensation for carrying out these duties in the form of salaries or periodic drawings from the business profits should be clearly mentioned to avoid disputes and/or misunderstandings during the currency of the agreement. Circumstances for removal of partners is another area that would require consideration. It may be inconceivable to speak of this at the time when a limited partner or partners are being invited to join the business. However, the business should be fully prepared to meet a contingent situation and safeguard the interests of the business.
A wide range of other issues will figure in the limited partnership agreement. Before initiating this agreement, the tax implications on the business must be clearly understood though a limited partnership is often considered advantageous from a taxation point of view. In some circumstance, this assumption may not be viable for the business. Finally, a limited partnership agreement is not a simple document that you can download from the digital space, print out and get executed. Competent legal guidance is always desirable in crafting this complex document.