Limited Partnership Agreement

In this article, we will look at what a limited partnership is, and how an agreement between partners is formulated. At the end, an agreement template has been provided for use.
BusinessZeal Staff
A partnership firm is considered to be a basic form of business organization. It is principally a collaboration between two or more people to conduct an economic activity or business which is lawful and yields profit. The contract is legally enforceable and binding. In some countries, registering a partnership firm with the requisite governing body is mandatory.

Features
A limited partnership can consist of general and limited partners. General partners have a very active role in the liability of the firm as they can be personally liable for all the partnership's debts. They are agents for themselves and also for the other partners. A limited partner contributes capital but is only liable up to the amount he initially invests in the business. In many cases, the limited partner does not have the power to be an agent. Though, a limited partner rarely participates in the day-to-day working of a partnership, he or she has an important say in major decisions.

Agreement Template
A Limited Partnership Agreement defines the terms of your partnership and helps protect the success of your future business venture. Let's look at the template presented below, in order to get a better idea about the articles and clauses that are usually present in such an agreement.

An explanation, in italics, has been affixed within each section.

Limited Partnership Agreement

for proposed name of the partnership firm


a recital is usually used at this location and is according to the enactment, law, or legislation under which the firm is being conceived. It usually goes as...

This document, agreement, and contract drafted in common faith signifies the partnership between names and addresses of the partners follow
____________________
____________________
____________________
____________________
____________________
from the date of ______ of month ______ of the year _________. The agreement has been signed in good faith and facts which are true to the knowledge of the signatories, notary, and witnesses who, as of the said date, were of sane mind, financially solvent, of the legal age, were under free will, and free from any influence.

Article 1: Partners and the Firm
This article is principally an identification clause which identifies the different people, location, etc.

Partners
Names and addresses of all the partners along with some important identification number such as a Social Security Number (SSN) are mentioned here.

Partnership Firm
This clause includes the purpose and objectives of the establishment.

Formation
Compliance, registration, and some formation regulations that have been fulfilled, are included in this clause.

Premises
This clause includes the details of the different locations, premises, and their ownership.

Term
In this clause, the time period for which the firm would exist and in which circumstances it may be dissolved, is mentioned.

Article 2: Capital and Financials
This article contains information related to the transactions of the firm.

Capital
This clause includes the exact amount of contributed capital which may be in cash or kind.

Profit and Loss Sharing Ratios
In this clause, the ratio in which profit and loss is to be shared, is included.

Borrowings, Advances and Salaries
This paragraph includes the empowered borrowing and lending capacities of the partners individually and also as a group, plus additional incomes, withdrawals, and allowances.

Additional
This clause is of absolute importance as it includes some important features such as account numbers, policy, and security numbers.

Liability
This is a very important clause since it defines the liability of the partners.

Article 3: General and Specific Association
This is the largest of all articles and is basically a set of provisions. Some of the important aspects that are included in this article are the authority and responsibility of the partners, agency and attorney powers, decision-making powers, further capital contribution, etc.

An agreement for a limited partnership can be complicated to draft. Hence, it is recommended that you seek the services of a lawyer to make a flawless agreement.