The Trouble With Partner Agreements

Source: The Marc Rosenberg Blog

The following includes excerpts, reproduced with permission, from a blog post by Marc Rosenberg.

Here are 10 partner agreement areas we see neglected time and time again:

1. Partner retirement provisions – particularly notice of intent to retire and specific client transition procedures – are hopelessly behind the times or simply ignored.
2. New-partner buy-in amounts are too high.
3. Ownership percentage plays a huge role in income allocation, retirement benefits, and voting.
4. Agreement fails to restrict partners from drawing compensation that is higher than their income allocation percentage.
5. Voting is driven by ownership percentage, disenfranchising new partners.
6. Grounds for expulsion are not detailed enough.
7. Agreement lacks nonsolicitation provisions.
8. Agreement fails to specify compensation for a nonworking, disabled partner.
9. Agreement goes into too much detail about the system used to allocate partner income. The best agreements are almost completely silent on this issue because firms change their systems so often.
10. Agreement fails to provide for non-equity partners and non-CPA principals.

For the complete article, read “CPA Firm Partner Agreements – Top 10 Weaknesses.”

From The Marc Rosenberg Blog, February 28, 2012, http://blog.rosenbergassoc.com.