Limited Partnership Operating Agreement - The Moral Compass?

Auguest 8, 2004
By Richard Smith, LLB

Along with your partnership certificate of registration, submitted to the secretary of state, your limited partnership operating agreement is the founding document of your limited partnership.

It's important to know exactly what goes into these documents, as they will govern all your future actions.

Ideally, properly formed limited partnership operating agreements will, include:
- (i) the name of the limited partnership;
- (ii) the registered address of the partnership;
- (iii) the contribution each partner has made to the limited partnership;
- (iv) how profits are to be allocated, and how losses are to be paid for;
- (v) who each general partner is going to be (assuming there are more than one, otherwise merely the name of the general partner);
- (vi) the authority of the general partner(s);
- (vii) the authority of the limited partners - and their relationship with the general partner(s);
- (viii) how to admit new partners, and how to release partners wishing to exit the partnership (including if a partner should die);
- (ix) how to dissolve the partnership (in the event that you have a dispute which you cannot resolve);
- (x) the accounting system the partnership is going to use.

Limited Partnership Operating Agreement - Is It Legally Required?
No, an operating agreement for a limited partnership does not legally need to be entered into. It is sufficient, in most states, for the limited partnership to merely submit a registration certificate to the secretary of state in the relevant state.

However, it is generally considered very prudent practice to enter into an operating agreement to regulate how the limited partnership is going to regulate its operations; failing which, in the event of a dispute, there may be lots of litigation that could have been easily settled early on by setting out all of the above in an operating agreement.

For this reason, although it is not a legal requirement that you submit the operating agreement with the registration certificate to the secretary of state, you may find that a secretary of state asks for a copy of the operating agreement in the event that you have not submitted one - just to ensure that one exists.