Feature: Get It In Writing - Partnership Agreements
teenwriting.jpgLawyers who spend most of their professional lifes telling their clients to “put it in writing” are likely to be the very same people who do not have a written agreement with their partners. The fact that many practices today continue to operate successfully without one or that your partner is also your best friend are not valid reasons for not entering into a partnership agreement. Problems may arise in even the most harmonious and well-intentioned partnerships.

Referral and fee sharing aside, what protection does the practice have if a partner withdraws and takes the best clients with him? What can the practice do about unproductive partners? What happens if a partner dies or becomes impaired? The checklist below raises some of the issues that should be addressed by all parties to the partnership.

Expulsion, disability, death and liquidation are not happy outcomes. Friends and colleagues coming together in anticipation of a fruitful and mutually beneficial partnership may not be in the frame of mind to consider the possibility of failure. However, all will readily admit that it is better to discuss and agree on how to resolve possible conflicts in the abstract than wait until a real problem arises with attendant bruised egos and aggrieved feelings.

It is at these difficult times that your agreement will prove its true value in preventing acrimonious (and no doubt, since it involves lawyers), highly publicised and reputation damaging litigation. PARTNERSHIP AGREEMENT CHECKLIST

1. Capital Contributions & Payment Obligations

2. Allocation of Profits

3. Voting Rights

4. Management Rights, Roles & Scope of Responsibilities

5. Admission of New Partners 

6. Retirement – Is there a fixed mandatory retirement age? Any retirement benefits? Are retirement benefits funded or unfunded? Will there be any return of capital contribution at retirement? 

7. Withdrawal – Under what circumstances can a partner withdraw from the practice? How much notice? How will unbilled time and uncollected fees be distributed?  

8. Expulsion – What grounds for expulsion? How much notice? What procedures for transferring live matters? Informing the clients? Managing monies received to his account?

9.  Death and Disability – How is a disability determination made? How long with the practice continue to support a disabled partner? When does a deceased partner’s interest in the practice terminate?

10. Dissolution – What grounds for dissolution? What are the partner’s duties, rights and responsibilities during dissolution? How will the profits and capital be distributed?
 

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