Partnership Agreements: An Update

Source: CPA Leadership Institute Succession Advisory Newsletter

Following are results and summary highlights of the most recent Succession Advisory Survey conducted by CPA Leadership Institute.

Which of the below best describes your situation?

• We have a signed partnership agreement that has been reviewed within the last 18 months: 54.1%

• We have a signed partnership agreement that has NOT been reviewed within the last 18 months: 27.5%

• We have no partnership agreement: 10.1%

• We have a partnership agreement but it is not signed: 8.3%

Our experts, Joel Sinkin and Terry Putney from Transition Advisors, LLC, a consulting firm working exclusively in the area of ownership transition for accounting firms, felt the responses were very promising.

They shared with us that in prior informal surveys, a higher percentage of firms did not have a recently reviewed signed partnership agreement.

Sinkin said, “The hope is that accounting firms are starting to realize how important having a signed agreement is as well as the fact that it should be reviewed regularly.” Putney added that “even though it has improved, the fact remains that in excess of 45 percent of the respondents either have not read their agreement in a long time or don't have a signed one, which remains too high a number.”

The goal is to increase the number of firms with signed documents and to ensure the agreements are done well.

Sinkin and Putney shared that a good agreement addresses governance, compensation, buyouts, termination, addition of new partners, and retirement, and protects both the firm and the partners.

For the complete report, read, “Succession Advisory Survey.”

From CPA Leadership Institute Succession Advisory Newsletter, May 2014, //www.cpaleadership.com/members/Current_Succession_Advisory_Newsletter.cfm.