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.
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.
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.
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
Article 1: Partners and the Firm
Article 2: Capital and Financials
Profit and Loss Sharing Ratios
Borrowings, Advances and Salaries
Article 3: General and Specific Association
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.