The Limited Partnership Agreement for a Maryland LP

For a limited partnership, the governing document is the limited partnership agreement — the LP's equivalent of an LLC's operating agreement. It is the private contract among the partners that defines their rights, obligations, and economics. Maryland does not require you to file it, and it never becomes part of the public record; only the Certificate of Limited Partnership is public, and that document names just the general partners and the resident agent.

Maryland does not legally compel you to have a written agreement, but for an LP, going without one is genuinely reckless. The whole structure rests on a sharp distinction between general partners who manage and bear unlimited liability and limited partners who invest and stay passive. If that distinction is not carefully documented, disputes get resolved by Maryland's statutory defaults — and those defaults rarely reflect what the partners actually negotiated across a table.

What the statute does when you have no agreement

The Maryland Revised Uniform Limited Partnership Act supplies default rules for allocations, distributions, voting, and withdrawal. Those defaults are gap-fillers, not tailored terms. A real estate deal where the general partner expects a carried interest, or a fund where investors negotiated a preferred return, will not get those terms unless the agreement spells them out. The agreement is where you override the defaults with the deal you actually made.

The financial heart of the agreement is who contributed what and how the money comes back out. This is the section limited partners scrutinize most, because it defines their return.

Capital contributions

• What each partner contributed at formation — cash, property, or services — and the agreed value of each
• Whether and when partners can be required to contribute more (capital calls), and what happens to a partner who fails to meet a call
• How each partner's capital account is tracked over time

Profit and loss allocation

Allocations do not have to match ownership percentages, and in LPs they frequently do not. The agreement specifies how profits and losses are divided among general and limited partners — including any preferred returns to limited partners and any carried interest or promote to the general partner. Getting this right is essential and often has tax consequences worth reviewing with a CPA.

Distributions

Separate from allocations, distributions are the actual cash payouts. The agreement sets when distributions happen, in what priority (for example, returning limited partners' capital and preferred return before the general partner shares in the upside), and whether any reserves are held back. Clear distribution waterfalls prevent the disputes that otherwise erupt the first time real money is on the table.

Because the general partner runs the business and carries unlimited liability, the agreement should define that role with precision.

Authority

• What the general partner can do unilaterally — sign contracts, borrow, buy and sell assets, hire and fire
• What decisions require limited partner consent — often major matters like selling the primary asset, admitting new partners, amending the agreement, or dissolving the partnership
• Any spending or borrowing thresholds above which consent is required

Duties and standard of care

The general partner owes duties to the partnership and its limited partners. The agreement can clarify the standard of conduct and, within the limits Maryland law allows, define how conflicts of interest and related-party transactions are handled. Investors want to know the general partner cannot simply act against their interests.

Compensation

How the general partner is paid for managing — a management fee, a share of profits, a carried interest, or some combination — belongs in the agreement. Silence here breeds resentment and litigation; clarity keeps the relationship functional.

The limited partners' whole bargain is limited liability in exchange for passivity. The agreement should reinforce that bargain, not accidentally undermine it.

What limited partners get

• Economic rights: their share of profits, losses, and distributions as defined in the economics section
• Information rights: access to the partnership's books, financial statements, and tax information (K-1s) so they can track their investment
• Voting rights on fundamental matters: the specific major decisions on which limited partners get a say

Preserving passivity

Here is the critical part for an LP: a limited partner who crosses into active management can, in some circumstances, be treated as a general partner toward third parties who reasonably relied on their apparent control — forfeiting the very liability protection they signed up for. Maryland's statute provides "safe harbor" activities a limited partner may perform without crossing the line — voting on the matters the agreement reserves to them, consulting with the general partner, serving as a contractor or agent of the partnership, and similar acts. A well-drafted agreement lists the limited partners' permitted activities in a way that keeps them safely inside the harbor.

The agreement should anticipate change — partners come and go, interests get sold, and eventually the partnership ends.

Transfers and new partners

• Whether and how a partner can transfer their interest, and any rights of first refusal or general partner approval required
• How new limited partners are admitted and how their contributions and rights are set

Withdrawal and buyouts

• What happens when a partner wants out — how their interest is valued and paid, and over what timeline
• What happens on a general partner's withdrawal, death, or incapacity, and whether the partnership continues or dissolves

Dissolution

The agreement should state what events trigger dissolution and how winding up proceeds — the order in which creditors are paid and remaining assets distributed to partners. Because Maryland requires a Certificate of Cancellation to formally end the LP, aligning the agreement's dissolution mechanics with that process keeps the closeout clean.

How Mainstay Filing fits

We handle the state-facing paperwork — filing your Certificate of Limited Partnership and serving as your resident agent — but the limited partnership agreement is a legal document that should reflect your specific deal. We do not draft it or advise on its terms. For an LP that pairs a general partner with real investors and real money, having an attorney prepare or review the agreement is money well spent, and we are glad to work alongside your counsel on the filing side.