Blog Series Part 2: What Should Be in Your LPA (But Often Isn’t)

February 2025

Blog Series: Private Fund Terms That Matter
Part 2: What Should Be in Your LPA (But Often Isn’t)

Limited Partnership Agreements (LPAs) are the legal backbone of a private fund. Every material term that governs how a fund is managed, how decisions are made, and how investors are treated should be reflected in that document. And yet, even in well-run funds, we often see gaps, vague provisions, or terms that don't match current business realities. At Moeller Law PLLC, we help fund managers refine and negotiate LPAs that are not only legally sound, but operationally aligned and built to scale. As outsourced general counsel, we’re often called in to review older templates, draft amendments, or coordinate updates across fund counsel, tax advisers, and operations teams.

Here’s a look at what’s frequently overlooked in LPAs — and how a more proactive approach can protect both the fund and the manager.

Decision-Making Provisions That Are Too Vague

We often see LPAs that leave decision-making authority unclear. For example, removal of the general partner, changes to investment guidelines, or amendment mechanics might reference “a majority in interest” without defining what that means in the context of multiple classes of limited partners or defaulting investors.

Clarity matters. When funds scale or face disputes, ambiguous governance provisions can paralyze the manager or lead to LP pushback. It's far better to address these issues during formation, when alignment is still high.

Fee and Allocation Language That Doesn’t Match Reality

LPAs often carry forward language from prior funds or borrowed templates, even when the economic terms of the deal have changed. We've reviewed LPAs where the waterfall did not match the actual distribution practices, or where the management fee language failed to capture nuances around fee offsets, waivers, or step-down schedules. These inconsistencies aren’t just cosmetic. If an LP ever challenges the fund’s economics, or if you’re preparing for a successor fund raise or diligence by institutional LPs, these issues become critical. We help ensure the language reflects how the fund actually operates, and that it aligns with the PPM, side letters, and financial modeling.

Missing Provisions Around Key Person, Suspension, and Successor Fund Rights

In early funds, managers often overlook provisions that become important later: what happens if a founder departs, how fund operations pause during a key event, or what rights LPs have when a successor fund is launched. These can become flashpoints if the team changes or strategy shifts over time. Even in more mature funds, we’ve seen LPAs with no clear timeline or approval process for launching follow-on vehicles. Institutional LPs increasingly expect visibility into these decisions. We help clients draft forward-looking provisions that protect both flexibility and transparency.

Enforcement, Compliance, and Side Letter Integration

Modern LPAs should also include mechanics for dealing with side letters, compliance policies, and enforcement rights. As more LPs ask for tailored terms, GPs need the ability to enforce side letter rights in a consistent way, and to confirm that such rights don’t override core LPA terms unless explicitly allowed. We also recommend addressing regulatory obligations — for example, whether the GP can share information with regulators without breaching confidentiality provisions — and ensuring that expense allocation language is robust enough to cover current fund activities.

How Moeller Law PLLC Supports Fund Managers

We work with fund managers to review and modernize LPAs, whether during initial formation, new fund launches, or amendment processes. Our role can include direct drafting or serve as an internal legal quarterback, coordinating input from tax, finance, and compliance teams to make sure the LPA functions as a true operational charter — not just a placeholder to get through closing. Because we’re often involved across side letters, subscription materials, and adviser filings, we help ensure consistency throughout the full documentation set. And where needed, we coordinate directly with fund counsel to keep things moving efficiently.

An LPA isn’t just a technical document — it’s a contract with your investors and a map for running the fund. Weak or outdated terms may not cause problems today, but they usually do later, especially as your platform grows or your investor base becomes more institutional. Moeller Law PLLC provides outsourced general counsel support to fund managers looking to tighten up their fund documentation and align it with current best practices. If your LPA hasn’t been reviewed in a while, or if your current terms don’t reflect how the fund actually runs, we’d be happy to help.

Let’s connect to take a closer look at your fund documents.

Up Next: Co-Investment Terms: Alignment, Access, and Risk