A Partner's Agreement Checklist

Kathy Fortin
July 8, 2016

Partner relationships require a comprehensive written agreement.  If your firm does not have an agreement, or the current one is outdated, don’t wait for trouble to strike.  Now is the time to review the agreement and put the partnership house in order.

Depending on the type of entity, whether a partnership agreement, the by-laws, or the operating agreement, there are critical provisions to be addressed:

  • Partners -- What is the process for inviting lawyers become partners?  Is there a buy-in?
  • Capital -- What is the amount of startup capital contributed by each of the original partners?  What capital contribution, if any, will be expected of new partners? 
  • Voting -- What are the voting rights of the partners?  Equal votes?  Weighted votes?  What issues will require a supermajority?
  • Profits -- How are the profits to be divided among the partners?  Is the system an effective management tool rewarding desired behaviors and penalizing unwanted behaviors?
  • Management -- How will the partners handle firm management? 
  • Retirement – What happens when a partner elects to retire?  What are the rights of the partner and what are the obligations of the partnership?
  • Disability -- What happens if one of the partners becomes disabled?  How long will the firm continue to pay compensation to the disabled partner?  How are the terms temporary disability and permanent disability defined?
  • Death -- What happens if a partner dies?  Does the estate of the deceased partner have a right to a payment of the deceased's ownership interest in the firm?  How is the interest of a deceased partner valued for these purposes?
  • Withdrawal – What happens when a partner decides to withdraw from the firm?  How much notice is required?  How is the firm’s interest protected?  What monies is the withdrawing partner entitled to receive?
  • Expulsion -- What are the rights of the partnership to terminate a partner?  What are the grounds?  What behaviors would trigger an automatic termination?  What behaviors would represent cause for discretionary termination if so voted by the partners? 
  • Liquidation -- What are the rights and responsibilities of the partners after a vote to liquidate?

Consider This
Sooner or later, lawyers without adequate partnership agreements have “war stories” to tell. Unfortunately, they have learned the hard way the importance of having provisions in place.  Why not correct the deficiencies in your law firm agreement? And, if you are operating without one, act fast to be prepared.