{"id":55462,"date":"2018-11-14t12:00:19","date_gmt":"2018-11-14t17:00:19","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=55462"},"modified":"2018-11-14t17:23:28","modified_gmt":"2018-11-14t22:23:28","slug":"when-solos-bring-in-partners","status":"publish","type":"post","link":"\/\/www.g005e.com\/2018\/11\/14\/when-solos-bring-in-partners\/","title":{"rendered":"when solos bring in partners"},"content":{"rendered":"
<\/a>7 must-haves. by marc rosenberg<\/i> many major cpa firm transactions \u2013 partner agreements, mergers, the first retirement of a partner and bringing in a new partner \u2013 have one thing in common: firms have very little if any experience with them.<\/p>\n more:<\/b> 8 key items for partner agreements<\/a> | 12 basics of partner agreements<\/a> | partner agreement issues affecting women<\/a> | quick tip: partners investing in clients<\/a> | non-equity partners: why have them?<\/a> | why you might want an executive committee<\/a> | buyout when a partner dies<\/a> | why and how new partners buy in<\/a> in many cases, it\u2019s the first time they have ever contemplated this move. but bringing in a new partner cannot be done in isolation. all of the following are needed:<\/p>\n <\/p>\n partner agreement\u00a0<\/strong><\/p>\n a solo obviously does not need a partner agreement. that changes when he or she brings in a new partner. a smart partner candidate should insist on a partner agreement before accepting any offer of partnership.\u00a0<\/strong><\/p>\n buyout agreement<\/strong><\/p>\n although this is a basic part of a partner agreement, the perspective is different for solos bringing in a new partner.<\/p>\n compensating the new partner<\/strong><\/p>\n how will you do this? will you continue deciding the new partner’s compensation just as when he or she was staff? do you want to create a formula or other system for compensating the new partner or both of you? if you want to give the new partner a promotion raise, where will the money come from \u2013 out of your own paycheck?<\/p>\n retaining control over the firm<\/strong><\/p>\n bringing in a great staff person as your partner is exhilarating and satisfying. gradually, you will most likely want him or her to assume control over the firm. but probably not any time soon. how will you protect yourself and retain control over the firm while not making the new partner feel as if he or she was promoted to continue functioning as an employee while having a partner title?<\/p>\n getting a new partner to perform like a partner<\/strong><\/p>\n a few years ago, i worked with a two-partner firm to bring in a third partner. as is commonly the case, the new partner had been a staff person with the firm for 20 years or so and was indispensable as a worker bee on the clients of the two partners. but the new partner had never brought in a client. the partner compensation formula paid based on the usual metrics: business brought in, the size of the client base managed and billable hours.<\/p>\n during the discussions the three had on how the firm would work with three partners instead of two, especially compensation, the new partner asked a great question: \u201cnow that i am a partner, how will my role change? because of your compensation formula, the only way i can make decent ‘partner’ money is to dramatically reduce the time i spend supporting the two of you and develop my own client base.\u201d<\/p>\n the two partners were stunned. they realized that it would be suicidal to incentivize the new partner to develop his own client base at the expense of reducing the time he spent supporting them. plus, they didn\u2019t really feel that the firm needed much more business.<\/p>\n so they compromised. the new partner took over a fair number of the senior partners\u2019 clients, continued to provide support to them and was encouraged to bring in some new business and build his own client base.<\/p>\n the moral of the story: firms need to give thought to how the role of a new partner will change, if at all, from when he or she was a manager.<\/p>\n name of the firm<\/strong><\/p>\n this can be a bit dicey. though some new partners may not insist on adding their name to the firm\u2019s name, it\u2019s likely that all new partners of a solo will at least think about it.<\/p>\n if new partners ask about getting their name in the firm\u2019s name, what do you do?<\/p>\n there are two types of scenarios:<\/p>\n in both cases, most firms wait a period of time before considering putting the new partner\u2019s name in the firm\u2019s name. the waiting period, which is rarely formalized or in writing, is for both the solo and the new partner to try out this new role. for the dynamo, the waiting period could be as short as a year or two. but for the other type of new partner, it may not ever be appropriate to change the firm\u2019s name, especially if the solo\u2019s exit strategy is to eventually sell the firm.\u00a0<\/strong><\/p>\n equity vs. non-equity partner<\/strong><\/p>\n solos should be aware that they need not promote the new partner directly to equity partner. they can make him or her a non-equity partner first. this could be a permanent position for the new partner or a way station for eventual promotion to equity partner. it\u2019s up to the solo.<\/p>\n a full 60 percent of multipartner firms have non-equity partners, so this practice is common and sensible. if it works for larger firms, it should work for solos.<\/p>\n","protected":false},"excerpt":{"rendered":"
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