This agreement establishes a limited partnership, a form of partnership established
under state law, between one general partner and two limited partners. In limited
partnerships, general partners have unlimited liability and are responsible for managing
the partnership's business. Limited partners have the right to share in the profits of the
limited partnership and they have limited liability, to the extent of their capital
contribution to the partnership, but they do not take part in managing the partnership.
This document sets forth the terms and conditions of the limited partnership and can be
customized to fit the needs of the drafting parties.
Agreement to Form a Limited Partnership
Agreement made on (date), between (Name of General Partner), of (street
address, city, state, zip code), hereinafter called General Partner, and (Name of Limited
Partner Alpha), of (street address, city, state, zip code), hereinafter called Alpha, and
(Name of Limited Partner Beta), of (street address, city, state, zip code), hereinafter
Whereas, General Partner desires to start a business of (describe business); and
Whereas, General Partner needs financial backing for his proposed business;
Whereas, Alpha and Beta desire to invest in the business of General Partner,
and to limit their liabilities in the business to the amount of their investment;
Now, therefore, for and in consideration of the mutual covenants contained in this
Agreement, and other good and valuable consideration, the parties agree as follows:
1. Formation of Limited Partnership
The General Partner and the Limited Partners (Alpha and Beta) shall create a
Limited Partnership on or before (date), pursuant to the provisions of the (name of state)
Uniform Limited Partnership Act, and they shall execute a Certificate of Limited
Partnership in the form attached as Exhibit A and made a part hereof by reference.
They shall also perform all acts necessary to perform as a Limited Partnership in the
state of (name of state).
2. Purpose and Duration
The purposes and duration of the Partnership shall be to (describe in detail).
Alpha and Beta shall each pay to the General Partner the sum of $___________
as the initial capital contribution of each Limited Partner, in cash, in exchange for each
having a _____% interest in the Limited Partnership. These contributions shall not be
payable until after the business has been in operation for a period of (number) months.
4. Share of Business
Alpha and Beta shall each receive a present _____% interest in the business
from the commencement of operation and continuously until the Limited Partnership
shall be dissolved in accordance with this Agreement. Each such Limited Partner shall
be entitled to _____% of the net profits of the business. The term net profits means the
gross profits from the business less (i) ordinary and necessary business expenses paid
in the conduct of the business; and (ii) a reasonable salary not to exceed
$_________ per year for the personal services contributed by General Partner.
Business expenses that are to be deducted under (i), above, from the gross income,
shall be the same as constitute allowable business expense deductions under federal
income tax laws.
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5. Profits and Losses
Profits referred to in the Section 4 shall be computed at the end of each
calendar year, and the shares to which prospective Limited Partners shall be entitled
shall be paid to the Limited Partners within (number) after the end of the calendar year.
6. Additional Limited Partners
General Partner shall have the right to take in (number) of additional Limited
Partners and to allow each additional Limited Partner to purchase a ______% interest in
the Limited Partnership for $____________ cash.
7. Liability of Limited Partners
Limited Partners shall not be liable on any contracts made by the General
Partner in the operation of the business, and shall not be liable for damages for which
General Partner shall become legally liable as arising out of the operation of the
business. The Limited Partners shall only be liable for losses suffered by the Limited
Partnership in an amount equal to their contribution to the Partnership. All losses
sustained in excess of that amount shall be the separate liability of prospective General
8. Death of Limited Partner
A. The death of a Limited Partner during the term of the Partnership shall not
Operate to terminate this Agreement. In the event of the death of a Limited
Partner during the term of this Agreement, General Partner shall have an option
to purchase the interest of the deceased Limited Partner for _______% of the
value of the Partnership business.
B. The value of the Partnership business shall include:
(i) book value of the Partnership assets;
(ii) accrued and undistributed profits;
(iii) goodwill; and
(iv) the market value of the Partnership business as a going business.
C. The value of goodwill shall be determined as follows: (describe method for
determining value of goodwill). The above option given to General Partner may
only be exercised for a period of (number) months after the death of a Limited
Partner, by giving notice of the election to exercise the option to the personal
representative of the deceased Limited Partner before the expiration of
the (number)-month period. The personal representative shall be entitled to
profits accrued to within (number) days of the payment of the purchase price for
the Limited Partner's interest, and the payment shall be made within
(number) months from the date of the death of the Limited Partner.
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General Partner shall at all times keep accurate and complete books of account
of the Partnership business, to which books prospective Limited Partners shall at all
times have free and ready access.
General Partner shall have the sole and exclusive management and control of
the conduct of the business, and shall at all times devote best efforts to the conduct of
the Partnership business.
The invalidity of any portion of this Agreement will not and shall not be deemed to
affect the validity of any other provision. If any provision of this Agreement is held to be
invalid, the parties agree that the remaining provisions shall be deemed to be in full
force and effect as if they had been executed by both parties subsequent to the
expungement of the invalid provision.
12. No Waiver
The failure of either party to this Agreement to insist upon the performance of any
of the terms and conditions of this Agreement, or the waiver of any breach of any of the
terms and conditions of this Agreement, shall not be construed as subsequently waiving
any such terms and conditions, but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred.
13. Governing Law
This Agreement shall be governed by, construed, and enforced in accordance
with the laws of the State of (name of state).
Unless provided herein to the contrary, any notice provided for or concerning this
Agreement shall be in writing and shall be deemed sufficiently given when sent by
certified or registered mail if sent to the respective address of each party as set forth at
the beginning of this Agreement.
15. Attorney’s Fees
In the event that any lawsuit is filed in relation to this Agreement, the
unsuccessful party in the action shall pay to the successful party, in addition to all the
sums that either party may be called on to pay, a reasonable sum for the successful
party's attorney fees.
16. Mandatory Arbitration
Notwithstanding the foregoing, and anything herein to the contrary, any dispute
under this Agreement shall be required to be resolved by binding arbitration of the
parties hereto. If the parties cannot agree on an arbitrator, each party shall select one
arbitrator and both arbitrators shall then select a third. The third arbitrator so selected
shall arbitrate said dispute. The arbitration shall be governed by the rules of the
American Arbitration Association then in force and effect.
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17. Entire Agreement
This Agreement shall constitute the entire agreement between the parties and
any prior understanding or representation of any kind preceding the date of this
Agreement shall not be binding upon either party except to the extent incorporated in
18. Modification of Agreement
Any modification of this Agreement or additional obligation assumed by either
party in connection with this Agreement shall be binding only if placed in writing and
signed by each party or an authorized representative of each party.
19. Assignment of Rights
The rights of each party under this Agreement are personal to that party and may
not be assigned or transferred to any other person, firm, corporation, or other entity
without the prior, express, and written consent of the other party.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute but one and
the same instrument.
WITNESS our signatures as of the day and date first above stated.
(Signature of Limited Partner) (Signature of Limited Partner)
(Printed Name of Limited Partner) (Printed Name of Limited Partner)
(Signature of General Partner)
(Printed Name of General Partner)
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