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Limited Partnership (LP) Agreement: Template, Filing Requirements, and GP vs LP Rights

Updated April 2026. The LP structure separates management (general partner) from investment (limited partner). Here is how it works and what to include in your agreement.

How an LP Differs from a General Partnership

FeatureGeneral PartnershipLimited Partnership
LiabilityAll partners: unlimited personal liabilityGP: unlimited; LP: limited to contribution
ManagementAll partners may manageOnly GP manages; LP is passive
State filing requiredNo (exists automatically)Yes (Certificate of LP)
Self-employment taxAll partners pay SE taxGP pays SE tax; LP typically does not
Common useSmall active businessesReal estate, private equity, family succession

GP vs LP Rights and Obligations

Right / ObligationGeneral PartnerLimited Partner
Manage the businessYes - full managementNo - management voids LP protection
Bind the partnership contractuallyYesNo
Inspect books and recordsYesYes (limited scope)
Vote on major decisionsYesSpecified in agreement (admission of new GP, winding up)
Transfer interestRequires all partner consentEconomic rights transferable; governance rights require consent
Personal liabilityUnlimitedLimited to capital contribution

LP Agreement Template Clauses

Formation and Partners
LIMITED PARTNERSHIP AGREEMENT The undersigned hereby form a limited partnership under [STATE] Uniform Limited Partnership Act: GENERAL PARTNER: [NAME], residing at [ADDRESS] LIMITED PARTNER(S): [NAME], residing at [ADDRESS] PARTNERSHIP NAME: [NAME] LP PRINCIPAL OFFICE: [ADDRESS] TERM: [Indefinite / Fixed term ending [DATE]]
Capital Contributions and Capital Accounts
CAPITAL CONTRIBUTIONS: General Partner: $[AMOUNT] = [X]% LP Interest Limited Partner: $[AMOUNT] = [X]% LP Interest CAPITAL ACCOUNTS: Separate capital accounts shall be maintained for each partner, adjusted annually for: (a) Additional contributions (increases) (b) Distributions (decreases) (c) Allocated profits and losses CAPITAL CALLS: The General Partner may issue capital calls with [30] days written notice. Limited Partners must fund within [30] days or face interest at [prime + 3%] plus dilution at [1.5x].
Distribution Waterfall

The distribution waterfall defines the order in which profits flow to partners. A typical real estate LP waterfall:

DISTRIBUTION WATERFALL: Tier 1 - RETURN OF CAPITAL: Distribute to Limited Partners until they have received 100% of their capital contributions. Tier 2 - PREFERRED RETURN: Distribute to Limited Partners until they have received a [8]% annual cumulative return on unreturned capital (compounded annually). Tier 3 - CATCH-UP: Distribute to General Partner until GP has received [20]% of total distributions (Tier 2 + Tier 3). Tier 4 - CARRIED INTEREST: Distribute [80]% to Limited Partners and [20]% to General Partner. Timing: Distributions shall be made [quarterly / upon sale of property / as determined by General Partner] from available cash after maintaining [3]-month operating reserves.
General Partner Authority
GENERAL PARTNER AUTHORITY: The General Partner shall have full authority to manage the Partnership, including: - Acquire, manage, finance, and dispose of Partnership property - Enter into contracts and incur obligations on behalf of Partnership - Hire and supervise employees, contractors, and professionals - Maintain Partnership books and prepare financial statements - File all required tax returns GENERAL PARTNER RESTRICTIONS (require LP vote): - Sale of all or substantially all Partnership assets - Admission of additional General Partners - Amendment of this Agreement - Voluntary dissolution of the Partnership GP VOTE THRESHOLD: Consent of Partners holding [majority / XX]% of LP interests.

State Filing Requirements (Certificate of Limited Partnership)

StateFiling FeeAnnual ReportNotes
California$70$800/year minimum franchise taxLP less favorable than LLC in CA due to $800 minimum tax
Delaware$200$300/yearMost flexible LP laws; preferred for investment funds
Florida$125$138.75/yearNo state income tax; popular for real estate LPs
New York$200Biennial report $9Publication requirement in 2 newspapers (~$1,500)
Texas$300No annual reportStrong asset protection laws
Nevada$75$125/yearStrong privacy protections

FAQ

What is the difference between a general partner and limited partner?

A general partner manages the partnership and has unlimited personal liability. A limited partner is a passive investor whose liability is limited to their investment - they cannot lose more than their capital contribution. The tradeoff: limited partners cannot participate in management without losing their liability protection.

What is required to form a limited partnership?

Forming an LP requires: at least one general partner and one limited partner; a Certificate of Limited Partnership filed with the Secretary of State (cost: $50 to $500); an LP agreement signed by all partners; and an EIN from the IRS. Operating an LP without proper filing exposes limited partners to general partner liability.

How are limited partnerships taxed?

LPs are pass-through entities filing Form 1065 and issuing K-1s. General partners pay self-employment tax on their share. Limited partners typically do not pay self-employment tax because they are passive investors, though they may be subject to passive activity loss limitations under IRC Section 469.

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Form Your LP Correctly

LP formation requires state filing. LegalZoom handles Certificate of Limited Partnership filings in all 50 states, starting at $249 plus state fees.

Form LP via LegalZoom