To understand the Association Agreement, one must first understand the limited association. Similar to the General Association, the Limited Association consists of one or more general partners and one or more limited partners. The general partners act as would be expected. On the positive side, they administer and control the association, share their profits, use their property and have authority to tie the other general partners. On the negative side, all are jointly responsible and solidarily by the debts and obligations of the Association.
Add to this the limited partners that are, as your name suggests, limited in what they can and can not do so. Limited partners can share benefits, receiving dividends of type. They can also avoid the joint and several responsibility for the debts of the Association. However, they can not link the association, nor have management control, generally. But they can sit on the board of directors without being considered to have management control. Finally, they are bound by the Statute to disclose their status as partners limited to the public, so that involuntary people think otherwise.
Sometimes it happens that limited partners may have management control and the power to unite the association, and this leads to the main distinctions between general associations and limited associations. First, limited associations are created, not for the intention of the parties, but by the Statute, when presenting registration documents with the State. Second, the Parties may decide to annul the limited partnership agreement by actually providing the parties limited with the rights they would not normally enjoy. And third, provided that the limited association observes certain rules related to limited liability, centralized management, duration and transfer of ownership, will benefit from the passage forward. Otherwise, it will be taxed as a corporation.
Limited associations are also distinguished from limited liability associations. In the latter case, all partners have limited liability. In the first case, only limited partners have limited liability; The general partners are still on the hook. To address this danger, the limited association can be established so that the general partner is actually a corporation or LLC.
Limited Association Agreements have a series of essential clauses. Because the agreements govern the association, it is important that they be clear and complete. Should the problems of control and authority address: Limited partners can administer or force the Association? They must also address the purpose of the association, its duration and termination; Possible assignment of association interests (which are considered values by law; the other partners have the right of first rejection, also, where a partner is trying to assign interest); And the money: How to divide the profits, how serious will be imposed and how to divide the debts of the association.
Limited Association Agreements are most commonly found in real estate and entertainment industries (cinema), where projects (such as building a building or making a film) are of finite duration and where duties can be carefully separated. That is, in these situations, the general partners carry out the investment and control the project, and the limited partners provide work and the Know-How. However, everyone enjoys the profits, at least theoretically.