what is a subscription agreement 
a subscription agreement is an investor s application to join a limited partnership lp it is also a two way guarantee between a company and a new shareholder subscriber the company agrees to sell a certain number of shares at a specific price and in return the subscriber promises to buy the shares at the predetermined price understanding subscription agreementsbroadly defined a partnership is a business agreement between two or more people who all have personal ownership in the business the partnership entity does not pay taxes instead the profits and losses flow through to each partner partners will pay taxes on their distributive share of the partnership s taxable income based on a partner agreement 3 law firms and accounting firms are often formed as general partnerships in a lp a general partner manages the partnership entity and brings in limited partners using a subscription agreement candidates subscribe to become limited partners after meeting standard requirements the general partner decides whether to accept the candidate limited partners act as silent partners by providing capital usually a one time investment and have no material participation in the business s operations as a result partners typically have little to no voice in the day to day operations of the partnership and are exposed to less risk than full partners each limited partner s exposure to business losses is limited to that partner s original investment the subscription agreement for joining the lp describes the investment experience sophistication and net worth of the potential limited partner subscription agreements are generally covered by sec rules 506 b and 506 c of regulation d 12 these stipulations define the method of conducting an offering and the amount of material information that companies are required to disclose to investors as new limited partners are added to an offering general partners obtain the consent of existing partners before amending the subscription agreement raising capital through a reg d investment involves meeting significantly less onerous requirements than a public offering this allows companies to save time and sell securities that they might not otherwise be able to issue in some cases subscription agreements with private placements