A limited partnership agreement (LPA) is the governing document of a private fund structured as a limited partnership. It defines the rights and obligations of the GP and LPs, fund economics, governance, and the rules for the fund's operations.
Why It Matters
The LPA is the single most important document in your fund. It controls economics (management fee, carry, hurdle), governance (GP removal, key person, LPAC), and operations (capital calls, distributions, reporting). Negotiating LPA terms with institutional LPs is one of the most time-intensive parts of fundraising, and the final terms will govern your fund for its entire life.
Key Details
- Defines the management fee (typically 1.5-2% of committed capital) and any fee offsets or reductions after the investment period.
- Sets carried interest terms, including the preferred return (hurdle rate), catch-up provision, and clawback obligation.
- Establishes key person provisions that pause or restrict investment activity if named principals leave the fund.
- Includes no-fault divorce provisions allowing a supermajority of LPs to remove the GP without cause.
- Specifies fund term (typically 10 years with extension options), LPAC composition, reporting obligations, and amendment requirements.
For a deeper look at the LPA and other fund documents, see the Private Fund Documents Guide.
Capital Company administers fund operations according to LPA terms, including management fee calculations, waterfall distributions, and investor reporting on the schedule your LPA requires.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.