Reviewing Your Partnership Agreement
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Source: Partner Advantage Advisory August J. Aquila, director of practice management for The Growth Partnership ([email protected]) offers the following advice on partnership agreements: v When firms are formed, the partners are usually young and not concerned about partner exits. Make sure the agreement is clear on what happens when the partnership decides to terminate a partner. v If a partner takes early retirement, many firms impose a reduction of benefits so as not to encourage partners to leave in their prime. v Firms don’t want partners to continue after their productive years. The agreement should include a mandatory retirement age, though this should not prohibit a former partner from being an employee of the firm. v While many firms insure the lives of their partners, few insure them for disability even though the probability of disability is greater than the probability of death prior to retirement. v There should be non-competition covenants that inhibit former partners from taking clients from the firm. These can include withdrawal of benefits, recapture of fees received from clients, injunctions, and offsets if the former partner does not assist in collecting receivables. v The methods of compensation should be clearly defined including base pay, return on investment, and bonuses. v The agreements should set forth the requirements for the admission of new partners, including equity contributions. From Partner Advantage Advisory, July 2005, p. 7. Hudson Sawyer Professional Services Marketing Inc. www.hudsonsawyer.com subscription $279 per year; single issues—$25. Orders |