The Limited Partnership Agreement for a Montana LP

A limited partnership agreement is the private, internal contract among the partners of an LP. It's the LP equivalent of an LLC's operating agreement, and it's where the real substance of the partnership lives. Montana does not require you to file it with the Secretary of State, and it never becomes a public record — which is exactly why it can carry the detailed financial and control arrangements the public Certificate leaves out.

Certificate vs. agreement

• The Certificate of Limited Partnership is public and thin. It names the partnership, its registered agent, and its general partner(s). It's what creates the entity in the state's records.
• The limited partnership agreement is private and thick. It sets out who contributed what, how money is split, who decides what, and what happens when things change or end.

One brings the LP into existence; the other governs how it actually operates. You can technically form an LP without a written agreement — Montana's statutory defaults would then fill every gap — but for a two-tier entity built on a deliberate split between managers and investors, relying on defaults is a poor idea. This document is where you say what you actually mean.

The agreement starts with what each partner puts in. In a limited partnership, capital is often the whole reason the limited partners exist — they're the funding side of the arrangement — so getting this right is foundational.

What the contributions section covers

• Initial contributions. What each partner contributed at formation — cash, property, or services — and the agreed value of non-cash contributions.
• Capital accounts. How each partner's capital account is tracked over time as contributions, allocations, and distributions move through it.
• Future contributions. Whether partners can be called on for additional capital, under what conditions, and what happens if a partner fails to answer a call.
• The general partner's stake. Whether and how much the general partner contributes, separate from the management role they play.

Because limited partners' liability is capped at their investment, the contribution terms directly shape their downside. And because additional capital calls can dilute or burden partners, the rules around them are worth spelling out precisely rather than leaving to assumption.

How the partnership divides its economics is often the most negotiated part of the agreement — and it doesn't have to track ownership percentages one-for-one.

Allocation vs. distribution

• Allocation is how profits and losses are assigned to partners on paper for tax purposes — the figures that flow onto each K-1.
• Distribution is when and how actual cash is paid out to partners.

These two can differ. A partner might be allocated income in a year when little or no cash is distributed, which has real tax consequences the agreement should anticipate.

Common structures

Limited partnerships frequently use tiered or preferred arrangements: limited partners might receive a preferred return on their capital before the general partner shares in the upside, and the general partner might earn a larger slice of profits above a threshold as compensation for managing the deal. These "waterfall" structures are common in real estate and fund LPs. However you set it up, the agreement should state the priority and the math clearly enough that no one is guessing at distribution time. Given the tax weight of allocations, this is a section to build with a CPA and an attorney, not a template.

The defining feature of an LP is the split between those who manage and those who don't, and the agreement is where that split is drawn precisely.

The general partner's role

The general partner runs the business and carries personal liability for its obligations. The agreement should define the scope of that authority: what the general partner can do unilaterally, what actions require partner approval, the general partner's duties to the partnership and the limited partners, and how the general partner is compensated for managing. It should also address what happens if a general partner withdraws, becomes incapacitated, or dies — since the loss of the last general partner can trigger dissolution unless the agreement provides a path forward.

The limited partners' rights — and limits

Limited partners are protected precisely because they don't manage. The agreement should reinforce that line while still giving limited partners the protections investors reasonably expect:

• Information rights — access to financial statements, tax information, and records.
• Voting on major matters — approval rights over fundamental changes like amending the agreement, admitting partners, or dissolving, without crossing into day-to-day management.
• The management boundary — a clear statement that limited partners don't participate in operations, protecting their liability shield.

Getting this balance right is delicate. Give limited partners too much operational control and you jeopardize their limited-liability status; give them too little protection and you'll struggle to attract investors. This is squarely lawyer territory.

A partnership is a living arrangement — partners come and go, interests change hands, and eventually the LP ends. The agreement should anticipate all of it rather than leaving these moments to improvisation.

Transfers and new partners

• Transfer restrictions. Whether and how a partner can sell or assign their interest — rights of first refusal, general partner approval requirements, and limits designed to keep the partnership stable.
• Admission of new partners. The process and approvals for bringing in additional limited partners or a new general partner.
• Withdrawal. What happens when a partner wants out — how their interest is valued and paid, and any notice required.

Winding down

The agreement should specify the events that dissolve the partnership (a partner vote, a fixed term, completion of the LP's purpose, or loss of the last general partner), and the order of winding up: settle debts to creditors first, then distribute the remainder to partners as the agreement directs. Spelling this out in advance prevents disputes at the emotional, high-stakes moment when a partnership actually ends.

Why you draft this with an attorney

Everything here — capital, allocations, control, liability, exits — carries legal and tax consequences specific to your partners and your goals. A generic template can't weigh those. Mainstay Filing prepares and files the state paperwork that creates and maintains your LP, but the limited partnership agreement itself should be drafted with a lawyer who can tailor it to what you're actually building.