these are non-negotiable for new partners.
by marc rosenberg
the rosenberg practice management library
when any business transaction takes place, both parties to the agreement must agree, preferably in writing, to the terms of the arrangement. bringing in a new partner is no exception.
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the document confirming this arrangement is the partner agreement. everyone has trepidations about signing a long document filled with legalese. the prospective new partner has probably never seen such a document before and is certainly not familiar with its standard provisions.
the following areas of typical partner agreements are considered non-negotiable by the firm:
- a buy-in that may not relate to the new partner’s share of the firm’s ownership or the firm’s value. it’s merely dues to get into the club.
- non-compete and non-solicitation covenants.
- commitment to an obligation to buy out older partners, whether you think they deserve it or not.
- capital cannot be withdrawn until termination.
- a partner’s capital account may eventually grow well in excess of the initial capital contribution, but not even a small percentage of it can be withdrawn for personal needs, even temporarily.
- the firm is likely to have a model of firm governance stated in the partner agreement. every partner, including new partners, must agree to comply with this model.
a new partner may not have much say in most day-to-day decisions:
– the mp, executive committee and department heads will make most decisions.
– partners do not have an inalienable right to be involved in all decisions.
– there are few partner votes, period.
- mandatory retirement.
- the manner and terms of partners working part-time after retirement is at the firm’s sole discretion.
- partners are accountable to the firm’s management for performance and behavior.
- making personal investments in clients’ businesses is subject to the firm’s approval.
- 100 percent of all partners’ time must be devoted to the firm: no outside businesses, public office, etc., without firm approval.
- total partner income will be determined in one of these ways:
- allocated to partners based on their performance
- allocated to partners based on a method decided by the partner group
- subjectively determined (if that is the way the firm decides to allocate income)