Fundraising and closing

LPA (limited partnership agreement)

Also called Partnership agreement, Fund agreement.

Definition

An LPA, limited partnership agreement, is the contract between a fund's general partner and its limited partners that establishes the partnership and sets its terms: commitments and capital calls, management fee, carried interest and the distribution waterfall, term and extensions, investment restrictions, reporting obligations, key person and GP removal provisions.

Updated October 9, 2026Checked against our editorial standards

Example

The LPA for a $50M fund sets a ten-year term with two one-year extensions, a five-year investment period, a management fee of 2% of commitments during the investment period stepping down to 2% of invested cost afterwards, 20% carried interest over an 8% hurdle through a European waterfall, ten business days to fund a capital call, and a limit of 20% of commitments in any one company. Each of those terms is a calculation the administrator runs. In year six, with $38M of cost still invested, the fee is 2% of $38M, or $760,000, against $1,000,000 in year five.

Confused with

Subscription agreement. The subscription agreement is how an investor joins the fund and agrees to be bound by the LPA. The LPA is what they are bound by.

Side letter. A side letter grants one LP terms outside the LPA. The LPA applies to all of them.

PPM. The PPM describes the offering and summarises the terms. The LPA is the binding version, and where the two differ the LPA controls.

In practice

The LPA is the document the auditor reads to test every fee and carry calculation, and the one counsel reads when something goes wrong. Amendments need the consent threshold it sets, often a majority or supermajority of commitments, so a term that turns out to be unworkable is expensive to change after final close.

Related terms

Subscription agreementA subscription agreement is the contract an investor signs to commit capital to a fund, stating the commitment amount, making representations about eligibility as an accredited investor or qualified purchaser, identity and source of funds, and agreeing to be bound by the limited partnership agreement when the general partner accepts the subscription.
Side letterA side letter is a bilateral agreement between a fund and a single limited partner that grants that LP terms beyond the limited partnership agreement, such as a management fee discount, most-favoured-nation rights, co-investment rights, excuse rights or additional reporting, and must be tracked and honoured in every subsequent calculation and notice.
Management feeThe management fee is an annual charge paid by the fund to the management company, typically 2% of committed capital during the investment period, often stepping down afterwards to a lower rate or a basis of invested capital, to cover salaries, rent and the cost of running the firm.
Distribution waterfallA distribution waterfall is the sequence in which a fund's proceeds are allocated between limited partners and the general partner, typically return of contributed capital first, then a preferred return to LPs, then a catch-up to the GP, then the remaining profit split at the carried interest rate.