The Michigan Limited Partnership Agreement

The limited partnership agreement is the internal contract that governs the LP. It's the LP's counterpart to what an LLC calls an operating agreement, but the substance is different because the entity is different — an LP has two distinct classes of owner with fundamentally different rights and risks, and the agreement is where that division is spelled out.

Michigan does not require you to file the partnership agreement with the state, and it never becomes public. Only the Certificate of Limited Partnership goes on the record with LARA. The partnership agreement stays private, held by the partners. But "not filed" doesn't mean "not important" — it's arguably the single most consequential document the LP has, because it controls the money and the power inside the partnership.

Why it matters more for an LP

In an LP, the stakes of a good agreement are unusually high. The general partner carries unlimited liability. The limited partners' protection depends on staying passive. The economics — who gets paid, when, and in what order — are often the whole reason the LP exists. If the agreement is vague or missing, Michigan's default statutory rules fill in, and those defaults are unlikely to match a deal that was negotiated around a specific project or investment.

At its heart, an LP is a financial arrangement, and the agreement's economic terms are where most of the negotiation happens.

Capital contributions

The agreement records what each partner contributes — cash, property, or services — and what it's valued at. It also addresses whether partners can be called on to contribute more later (a "capital call") and what happens if a partner fails to meet a call. For a fund or a real estate LP, the capital call mechanics can be the most heavily negotiated part of the whole document.

Profit and loss allocation

How profits and losses are divided among the partners. This doesn't have to track contribution percentages — an LP can allocate the economics in whatever way the partners agree, which is one of the structure's strengths. The agreement should be explicit, because ambiguity here is where disputes start.

Distributions

When cash actually goes out to the partners, and in what priority. Many LPs use a distribution "waterfall" — a defined order in which cash flows, often returning limited partners' capital first, then a preferred return, then a split with the general partner. Spelling out the waterfall precisely prevents fights when money is on the table.

The governance terms are where the general-versus-limited distinction becomes concrete, and where the agreement protects the very shield that makes the LP worth forming.

General partner authority and duties

The agreement defines what the general partner can do alone — the day-to-day management, signing contracts, hiring — and what requires broader consent. It also sets the general partner's duties to the partnership and, often, their compensation or management fee. Because the general partner runs everything and bears unlimited liability, defining the scope and limits of that authority protects everyone.

Limited partner rights — and the control line

Limited partners are passive by design, but "passive" doesn't mean "powerless." The agreement typically gives them:

• Voting rights on defined major matters — admitting a new general partner, amending the agreement, selling substantially all assets, dissolving.
• Information rights — access to the LP's books, financial statements, and tax information.
• Economic rights — their share of profits and distributions.

Critically, the agreement should keep limited partners on the safe side of Michigan's control line. If a limited partner participates in management like a general partner, they can lose their liability cap. A well-drafted agreement is written so limited partners exercise their rights without crossing into control — protecting the very shield they signed up for.

Protecting the general partner's structure

If the general partner is a corporation or LLC (a common way to shield the person behind that role), the agreement should reflect that and be consistent with how that entity signs and acts for the LP.

The agreement also governs how the partnership changes over time — who can come in, who can leave, and how it all ends.

Transfers of partnership interests

Whether and how a partner can sell or assign their interest, and what a transferee actually gets. Many LPs restrict transfers heavily — a right of first refusal, or a requirement of general partner consent — because the partners chose each other deliberately.

Admission of new partners

How a new limited partner or general partner is admitted, including the consents required. This matters especially for the general partner, since a change there can affect the Certificate on file with LARA and, under the statute, can bear on the LP's continuation.

Withdrawal

What happens when a partner wants out, what they're entitled to receive, and — importantly — the effect of a general partner's withdrawal. Michigan's LP law can treat a general partner's withdrawal as a dissolution trigger unless the agreement provides for continuation. A good agreement addresses this directly so one exit doesn't accidentally end the partnership.

Dissolution and winding up

The events that wind up the LP, and how remaining assets are distributed after creditors are paid. Tying the dissolution terms to the distribution waterfall keeps the ending consistent with the economics the partners agreed to at the start. Our dissolution page covers the mechanics of actually closing an LP down.

What we do — and don't

Mainstay Filing prepares and files the Certificate of Limited Partnership and provides resident agent service. We do not draft the limited partnership agreement — it's a negotiated legal document with real consequences for liability and money, and it belongs with an attorney who can tailor it to your deal. What we make sure of is that the state-facing filing is done right, so the private agreement rests on a properly formed LP.