A partnership agreement is the foundational governance document for general partnerships and limited partnerships, defining profit and loss allocations, capital contributions, management authority, voting rights, partner responsibilities, and dissolution mechanics. All lenders require it before approving loans to partnership entities.
Partnerships are governed by their partnership agreement plus the applicable state's Uniform Partnership Act (general partnerships) or Revised Uniform Limited Partnership Act (limited partnerships). Unlike LLCs, general partnerships provide no liability protection to general partners — each general partner is jointly and severally liable for partnership debts. Limited partnerships protect limited partners (who are passive investors) while general partners remain fully exposed. Core provisions of a partnership agreement: (1) Capital contributions — each partner's initial investment, obligations for future contributions, and treatment of capital accounts. (2) Profit and loss allocation — can be structured in any ratio agreed upon by partners (does not need to match capital contribution percentages, but must have substantial economic effect under IRC Section 704(b) to be recognized for tax purposes). (3) Management authority — for general partnerships, which partners have authority to bind the partnership; for limited partnerships, the general partner(s) manage and limited partners are restricted from management participation (or risk losing limited liability). (4) Distributions — when cash is distributed and in what order; tax distributions for partners' liability on allocated income. (5) Dissolution and liquidation — triggers for dissolution, liquidation procedures, and distribution priorities on wind-down. For financing, lenders require the full partnership agreement before loan closing. Key review items: who is authorized to execute loan documents on behalf of the partnership; what votes are required for borrowing; whether any existing liens, pledges, or consent requirements exist; and that all general partners sign or authorize the transaction (lenders typically require all general partners to personally guarantee partnership loans).
Under the Uniform Partnership Act default rules, each general partner has equal management rights and equal authority to bind the partnership — regardless of their capital contribution or profit share. The partnership agreement can modify this: authority can be delegated to a managing partner, or thresholds can require majority or unanimous consent for specific actions. Without a written agreement restricting authority, any general partner can legally bind the partnership to contracts and debts.
In a general partnership (GP), all partners are general partners — all have management rights and all are personally liable for partnership debts. In a limited partnership (LP), there is at least one general partner (full liability, management authority) and one or more limited partners (liability limited to their investment, no management participation). Limited partnerships are commonly used for real estate investment, private equity, and fund structures where investors want liability protection without day-to-day management involvement.
Yes — both general and limited partnerships are eligible borrowers under SBA 7(a) and SBA 504 programs. The SBA requires all partners with 20%+ ownership to provide personal guarantees. For limited partnerships, the general partner(s) must guarantee regardless of ownership percentage (since they have unlimited liability exposure anyway). The partnership agreement must confirm borrowing authority, and all required partners must sign the loan documents.