A limited partnership is one in which two or more partners conduct business together. It allows for one or more of the partners to be liable only to the extent of the money they have invested into the partnership. The limited partners will not receive dividends, but can expect direct access to income or expenses. This is generally known as a limited liability partnership.
How it Works
In this written legal document, the partnership details will be outlined specifically. This helps to protect the overall success of this business venture. All of the partners will understand all of the rights and liabilities associated with the partnership. Use a limited partnership agreement if you and your business partners have already formed a limited partnership, but would like to formalize terms or if you’re ready to form a limited partnership and want to define the terms before doing so.
What to Include
Things such as buy-out options and ownership interests are listed in this legal document. The specific management roles for the partners can also be described in detail. The limited partnership agreement should include details such as the name, address and purpose of the partnership, whether the partners have voting rights to day-to-day decisions, how decisions will be made, the names, percent ownership and the contribution of all of the partners in the partnerships, their roles in detail, accounting and auditing information, information on how to transfer and/or how to buy out shares and how the partner can be dissolved if applicable.
This foundation is a legal document for all limited partnerships between these parties. This agreement is a contract between all stated and will spell out the authority of all the partners and their various rights to the partnership in its entirety. Another name for a limited partnership agreement is a LP agreement.