Limited Partnership Agreement

---
name: limited-partnership-agreement
description: >-
  Drafts U.S. private equity and venture capital Limited Partnership Agreements
  (LPAs) covering GP/LP governance, capital commitments, distribution waterfalls,
  fees, carry, key person provisions, LPAC, transfers, tax, and dissolution. Use
  when drafting or revising a fund LPA, converting a term sheet to an LPA, or
  structuring fund formation documents. Trigger: limited partnership agreement,
  LPA, fund formation, capital calls, carried interest, waterfall, GP/LP.
tags:
  - agreement
  - corporate
  - drafting
---

# Limited Partnership Agreement (LPA)

Drafts an institutional-quality LPA governing GP/LP economics, governance, and lifecycle from formation through liquidation.

## Prerequisites

1. Fund name, jurisdiction, entity structure (LP, GP, manager/adviser).
2. Term sheet or economics summary (commitments, fees, carry, pref return, waterfall type).
3. Strategy parameters (sector, geography, stage, concentration limits).
4. Investor eligibility and regulatory profile (Reg D, qualified purchaser, ERISA).
5. Key person list, investment period, and term/extension mechanics.

## Quick Start

Collect inputs below, then draft articles in document skeleton order.

### Required Inputs

| Field | Notes |
|---|---|
| Fund legal name | Include "L.P." suffix |
| Jurisdiction | State LP statute; cite in formation article |
| Term and extensions | Initial term + extension mechanics |
| Investment period | Duration + early termination triggers |
| Capital commitments | By LP; via Subscription Agreements |
| Management fee | Rate, base, step-down, timing |
| Preferred return | Rate, compounding, calculation |
| Carry and catch-up | % split, catch-up mechanics |
| Waterfall basis | Whole-fund vs deal-by-deal |
| Key person | Event definition + suspension |
| LPAC (if used) | Composition + consent matters |
| Transfer restrictions | Consent + permitted transfers |
| Tax elections | Section 754, audit regime |
| Clawback | After-tax basis + escrow/guaranty |
| Dissolution triggers | Term, GP removal, judicial decree |

## Document Skeleton

Draft articles in this order:

1. **Definitions** — Consistent capitalization across all defined terms.
2. **Formation & Purpose** — State LP act citation, purpose, term.
3. **Capital Commitments** — Binding commitments via Subscription Agreements.
4. **Capital Calls** — Notice, timing, default remedies, cure period.
5. **Allocations** — 704(b) capital accounts, tax compliance.
6. **Distributions** — Waterfall tiers (whole-fund or deal-by-deal).
7. **Management** — GP authority, fiduciary standard if applicable.
8. **Fees & Expenses** — Management fee, offsets for transaction/monitoring/director fees.
9. **Key Person** — Event definition, suspension, LP remedies.
10. **LPAC** — Advisory role, consent matters (non-binding except as specified).
11. **Transfers** — Consent conditions, no tax termination trigger.
12. **Exculpation/Indemnity** — GP/affiliate, standard of conduct.
13. **Tax Matters** — Elections, BBA audit regime.
14. **Reports/Records** — K-1 delivery timeline, annual audit.
15. **Dissolution** — Triggers, wind-up authority, final accounting.
16. **Miscellaneous** — Amendments, notices, governing law.

## Core Provisions

### Distribution Waterfall

Standard four-tier European (whole-fund) waterfall:

| Tier | Recipient | Amount |
|---|---|---|
| 1 | LPs | 100% until return of contributed capital |
| 2 | LPs | 100% until preferred return satisfied |
| 3 | GP | Catch-up to achieve carry % on tiers 2–3 |
| 4 | LPs/GP | Split per carry (e.g., 80/20) |

- **Whole-fund**: carry only after aggregate return of capital + preferred return.
- **Deal-by-deal**: interim carry permitted; must add clawback + escrow.

### Fee Mechanics

- Investment period: % of commitments.
- Post-investment period: % of cost basis or FMV.
- Paid quarterly in advance.
- Offset transaction, monitoring, and director fees received by GP/affiliates.

### Capital Call & Default

- Notice period: 10–30 days; pro rata draw by unfunded commitment.
- Specify payment methods and wiring instructions.
- Cure period before default declaration.
- Default remedies: default interest, capital account reduction, forced sale at discount, forfeiture of distributions or voting rights.

### Clawback

- Calculate on after-tax basis.
- Escrow reserve or GP guaranty required.
- Final true-up at liquidation.

### LPAC Consent Matters

- Related-party/affiliate transactions.
- Conflicts and co-investments.
- Valuation policy changes.
- Auditor removal or replacement.
- Term extensions beyond initial period.
- Material amendments requiring LP consent.

### Tax & Regulatory

- Pass-through allocations; K-1 delivery deadline.
- Section 754 election authority.
- Centralized partnership audit regime (BBA 2015).
- Withholding authority for U.S. and non-U.S. partners.
- Investor representations: accredited investor, qualified purchaser.
- AML/KYC certifications.

### Dissolution

- Triggers: term expiry, GP withdrawal/removal, judicial decree.
- Wind-up authority and liquidation process.
- Final accounting with objection window.

## Pitfalls & Checks

- Cite the exact governing state LP statute in the formation article.
- Align defined terms, cross-references, and exhibit references throughout.
- Ensure allocation and distribution provisions are consistent with tax capital accounts and the waterfall.
- If deal-by-deal carry, escrow and clawback protections are mandatory.
- Transfer restrictions must avoid triggering tax termination or securities registration.
- Confirm regulatory representations match fund strategy and investor base.
- Flag nonstandard provisions or investor-specific side-letter carve-outs.