Limited Partnership Agreement - What To Include
Auguest 7, 2004
By Richard Smith, LLB
Probably the most important document that
any potential limited partnership will need to enter
into is the limited partnership agreement. Limited
partnership agreements, however, are not easy - after
all, there are several interest that need to be considered.
Notwithstanding this, there are some
elements of every limited partnership that do need
to be discussed, agreed to, then formerly set out
in the partnership agreement. In no particular order,
here the following are some of these.
Obviously the first thing the partnership needs to set
out in the partnership agreement is the name of the partnership.
If the partnership is only a few friends or colleagues, you may
want to consider using your own family names. Alternatively, where
there are more partners, or where you cannot agree which partner's
name to use first, you may want to use a business name. Whatever
name you decide to use, you make sure that the name of the partnership
has not been used previously and that LLP appear after the name
of the partnership.
Apart from the name of the partnership, the next issue the limited
partnership will need to consider is the level of contribution each
partner needs to make, and the allocation of the profits of the
partnership (if any) that'll be made in line with the level of the
contribution made. Aside from considering the allocation of profits,
the partnership agreement will also need to set out how much additional
contribution each partner may need to make in the situation where
the partnership makes a loss, rather than a profit.
After the above two issues, the partnership agreement needs to
consider what role each partner is going to have in the partnership
and the management and decision making authority each of those partners
is going to have.
Limited Partnership Agreement - The Unwind
It is an unfortunate fact of life that not all partnerships are
a successful relationship. As such, one essential element of your
partnership agreement is going to be what happens in the event that
the partnership want to dissolve its relationship; or replacing
one partner with a new partner; or even admitting new partners to
the limited partnership.
Finally, the partnership also needs to agree what will occur in
the event that one of the partners in the limited partnership dies.
Set out what happens in the event of the death of a partner, or
changes in the partnership relationship in general, are good practice
for ensuring that the partnership can evolve, grow, and continue
to sustain itself beyond the partners who go to make-up the partnership.
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