The Limited Partnership Agreement for a Delaware LP

The limited partnership agreement is the contract among the partners that defines how the LP operates. It's the LP equivalent of an LLC's operating agreement, but tailored to the two-tier structure of general and limited partners.

Private, not filed with the state

Delaware does not require you to file the limited partnership agreement, and it never becomes part of the public record. The only public document is the short Certificate of Limited Partnership, which reveals the LP's name and registered agent — nothing about the money or the deal terms. Everything substantive lives in the private agreement.

Why Delaware makes it so powerful

Delaware's Revised Uniform Limited Partnership Act (DRULPA) is built around freedom of contract. The statute expressly gives maximum effect to the terms the partners agree on, stepping in with default rules only where the agreement is silent. In practice, that means your limited partnership agreement — not the state — governs almost everything. A well-drafted agreement lets you build the exact economic and governance structure you want; a missing or vague one hands those decisions to statutory defaults that may not fit your intentions.

Have it before you operate

Sign the agreement before the LP takes in capital or does business. Doing the deal first and papering it later is how partners end up in disputes about what was actually agreed.

The heart of a limited partnership agreement is the money — who put in what, and who gets what back.

Capital contributions

The agreement records each partner's initial contribution — cash, property, or services — and any obligation to contribute more later (a "capital call" mechanism is common in funds). It should be explicit about what happens if a partner fails to meet a capital call: dilution, penalties, or loss of certain rights.

Profit and loss allocation

A key feature of an LP is that allocations don't have to match capital percentages. The agreement specifies how profits and losses are divided among general and limited partners. In many funds, this is where the carried interest — the general partner's outsized share of profits above a threshold — is defined. The allocation provisions are often the most negotiated part of the whole document.

Distributions

Separate from allocations (which are about who's taxed on what), distributions govern when cash actually goes out and in what order. A distribution waterfall typically returns limited partners' capital first, then pays a preferred return, then splits the remainder between the limited partners and the general partner. Spelling this out precisely prevents fights when money is finally on the table.

The two-tier structure means the agreement has to carefully define what each class of partner can and cannot do.

The general partner's authority and duties

The general partner manages the LP, so the agreement defines the scope of that authority — what the GP can decide alone, and what requires partner approval (major decisions like selling substantially all assets, admitting new partners, or dissolving). DRULPA also lets the agreement modify or expand fiduciary duties, within limits; sophisticated agreements often tailor exactly what the general partner owes the limited partners. The general partner's compensation — a management fee, the carried interest, or both — is specified here too.

Limited partner rights and the liability line

Limited partners are passive, and the agreement should reinforce that, because a limited partner who crosses into actively managing the business can lose their liability shield. Typical limited-partner provisions include:

• Voting rights on defined major matters
• Information rights — access to financial statements and records
• Transfer restrictions on their interests
• Explicit statement that they don't participate in day-to-day management

Protecting the general partner from unlimited liability

Because a general partner is personally liable in a bare LP, the agreement often works together with a structural choice — making an LLC or corporation the general partner — so no human bears unlimited exposure. The agreement should be consistent with that structure.

Beyond the economics, the agreement handles the lifecycle events that inevitably come up.

Admitting and removing partners

Set out how new limited partners are admitted (common in funds raising capital over time) and under what conditions a general partner can be removed or replaced. Removing the sole general partner without a plan for continuation can trigger dissolution under the defaults, so the agreement should address succession.

Transfer of interests

Partnership interests are usually not freely transferable. The agreement typically requires consent, grants rights of first refusal, or otherwise restricts transfers, so partners aren't stuck with an unexpected co-investor. It should also address what happens on a partner's death, bankruptcy, or withdrawal.

Dissolution and winding up

Define the events that dissolve the LP — a fixed term ending, completion of the venture, a partner vote — and the winding-up procedure: settle debts first, then distribute remaining assets to partners per the waterfall. A clear dissolution section is what makes an eventual clean close possible, tying directly back to the Certificate of Cancellation filed with the state.

Amendments and dispute resolution

Specify how the agreement can be amended (what vote is required) and how disputes are resolved. Many Delaware LPs choose Delaware law and the Court of Chancery precisely for its expertise in these disputes.

Here's the honest boundary: the limited partnership agreement is exactly the kind of document Mainstay Filing does not draft. It's a negotiated legal contract that defines the economics between general and limited partners, allocates profits, sets fiduciary standards, and structures the entire deal. Getting those terms right is legal work, and for anything beyond the simplest arrangement it belongs with an attorney.

What we do is the state-facing part that makes the agreement operative: preparing and filing the Certificate of Limited Partnership that brings the LP into existence, providing Delaware registered agent service, and keeping you on top of the annual tax. The agreement then governs the entity we helped bring to life.

If you're forming a straightforward LP, an attorney can draft a clean agreement quickly; for a fund or a multi-investor structure, the agreement is the deal and deserves careful drafting. Either way, treat it as essential — not a formality — because under Delaware law it, not the state's defaults, is what actually controls your partnership.