partner

are partner buyout plans just ponzi schemes?

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businessman tightly holding briefcase with dollar sign on itapply this test to your firm’s succession plan.

by marc rosenberg
retirements & buyouts

most multi-partner cpa firms have partner buyout plans that enable partners who leave the firm via retirement, death, disability or withdrawal to redeem their share of the firm’s value.

more on buyouts: 20 new, essential keys for today’s partner retirement plans | clawback and how to handle it | can partners compete after they leave? | retirement plan funding? what funding? | why you’ll get less from your partners in a buyout than you might by selling the whole firm | partners may balk at guaranteeing retirement obligations

over the last 10-20 years, retirement plans have come under more scrutiny as younger partners question whether departing partners are worth the payments due them and whether the firm can afford those payments. staff with near-term partner potential also question whether to commit themselves to making these payments. both of these groups fear that the firm will not be able to survive the retirement of dynamic, rainmaking partners who have tight relationships with their clients.

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20 new, essential keys for today’s partner retirement plans

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contract concept - conceptual close up of eyeglasses and ballpoint pen on top of partnership agreement paper placed on white table.

a lot is changing fast. here’s what your partner agreement needs today.

by marc rosenberg
retirements & buyouts

let’s take a moment to simply summarize the many critical aspects of a well written partner retirement/buyout plan.

at first glance, those unfamiliar with how a proper plan should be written may find the 20-plus key provisions listed below to be daunting. but i would caution against such thinking.  in my 20 years of consulting to cpa firms in this area, i have been asked to resolve messy disputes regarding every item listed below.

more on retirement: clawback and how to handle it | can partners compete after they leave? | disability is far more complex than death | even partner agreements must face death | 6 ways to leave a cpa firm (retirement’s just 1) | how to juggle tax considerations for partner retirement benefits | two ways to retire, and one’s not pretty | how to transition clients from retiring partners | compromise is in order for some goodwill payouts | why you’ll get less from your partners in a buyout than you might by selling the whole firm | the multiple of compensation method, fully explained

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clawback and how to handle it

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bear paw with clawsbear paw with clawsfive-year adjustments may ease partners’ minds.

by marc rosenberg
retirements & buyouts

some firms struggle to agree on the details of a partner retirement plan.

more on retirement: can partners compete after they leave? | disability is far more complex than death | how to juggle tax considerations for partner retirement benefits | mandatory retirement? 4 reasons the firm comes first | you want goodwill payments? give proper retirement notice | vesting can cover part-timers, too | why you’ll get less from your partners in a buyout than you might by selling the whole firm | the multiple of compensation method, fully explained

one of the biggest items of contention is the valuation of their goodwill for internal retirement purposes. in these cases, the partners are anxious about obligating themselves to pay huge buyout benefits.

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can partners compete after they leave? maybe.

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businessman with fingers crossed behind backbonus: sample non-solicitation agreement.

by marc rosenberg
retirements & buyouts

a non-compete covenant prohibits departed partners from joining another cpa firm or creating their own firm within a radius of a specified number of miles from the firm, within a specified period of time after their departure.

increasingly, firms are writing and enforcing tougher and tighter non-compete clauses.

one of the key tests that courts have used in ruling on the enforceability of non-compete agreements (different from non-solicitation) is the extent to which such agreements prevent the departing partner from earning a living.

more on retirement: disability is far more complex than death | 6 ways to leave a cpa firm (retirement’s just 1) | how to juggle tax considerations for partner retirement benefits | mandatory retirement? 4 reasons the firm comes first | how to transition clients from retiring partners | retirement plan funding? what funding? | when retiring partners take a specialty with them | clients leaving? time to reduce retirement benefits | partners may balk at guaranteeing retirement obligations

the vast majority of u.s firms are local practices located in areas with many competing firms. if a partner leaves to join another firm and does not attempt to take clients, it is very difficult to claim that the departing partner will substantially and irreparably damage the interests and the value of the firm.

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partner disability: worse than death?

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mature male patient playing a mobile on bed in hospital.the willingness to return to work may outstrip ability – then what?

by marc rosenberg
retirements & buyouts

you’ve probably heard the saying “disability is worse than death.” the point is that both death and disability are horrendous, catastrophic events.

more on buyouts: even partner agreements must face death | 6 ways to leave a cpa firm (retirement’s just 1) | how to juggle tax considerations for partner retirement benefits | two ways to retire, and one’s not pretty | mandatory retirement varies by firm size | mandatory retirement? 4 reasons the firm comes first | how to transition clients from retiring partners | you want goodwill payments? give proper retirement notice | retirement plan funding? what funding? | retirement vesting: the devil’s in the details | compromise is in order for some goodwill payouts

but the handling of issues related to death – for all parties concerned – are more straightforward, both personally and financially, than in the case of a disability. read more →