The Limited Partnership Agreement (LPA) is the foundational legal contract between a fund's general partner and its limited partners. It defines every material aspect of the fund's operations: investment strategy and restrictions, management fee rates, carried interest terms, waterfall mechanics, GP removal provisions, key person clauses, reporting obligations, fund term and extension rights, and the process for handling conflicts of interest.
LPA vs SPV Operating Agreement
Funds structured as limited partnerships use an LPA. SPVs structured as LLCs use an Operating Agreement, which serves a similar function but is typically shorter and simpler — reflecting the single-deal, single-purpose nature of the vehicle. A fund LPA may run 80–150 pages; an SPV operating agreement is often 20–40 pages. The complexity and cost of drafting the LPA is one reason fund formation costs significantly more than SPV formation.
LPA and Fund Administration
Every operational workflow in a fund — capital calls, distributions, fee calculations, reporting — is governed by the LPA. Automated fund administration platforms encode LPA terms (fee rates, waterfall tiers, hurdle rates, clawback provisions) as system parameters, ensuring every calculation and report is consistent with the fund's governing document. This eliminates the risk of manual interpretation errors that can lead to LP disputes and costly remediation.