December 18, 2018

 

Question:

Hi Jennifer, 

It looks like I will be solidifying a new partnership for the New Year.  Any tips on what I should look out for as key points? 

Thanks, Dr. I



Answer:


First, congratulations on the new marriage (which, for the avoidance of doubt, a partnership is)...  Second, yes, absolutely, here is a short list of some very basic concepts to confirm are included in the new deal (generic, and in no particular order) - 
  1. Writing - make sure your deal is in writing - especially the particulars
  2. Exit - if you are working on getting into a parntership, make sure you know and document how you can get out before you get in, or pay your way in
  3. Capital Contribution - is there a buy in obligation?  Sweat equity? On-going call obligations? 
  4. Exposure - understand whether you are stepping into or taking on any exposure - which is typically protected contractually
  5. Control - what say will you have as a partner?  Right to make decisions in a group or unilaterally?  Should be defined by contract. 
  6. Compensation - what right will you have to revenue/profit?  Will you have a bi-weekly salary or draw?  Right to split profits at the end of the year? 
  7. Insurance - what kind will and/or should you and the partnership hold? 
  8. Liquidity / Pre-Existing Obligations of Partnership - make sure you and your accountant have access to any preexisting books and records should you be joining an entity already in operation.  Make sure you know what you are signing up for... 
Be advised that a partnership, shareholder or operating agreement is a document you really should not dabble with as a "do it yourself" project.  If you would like assistance with review and/or drafting, let Jennifer know. 

The terms of your partnership may, in the end, have a tremendous impact on your tenure and departure, not to mention potential recovery for your family should something happen to you (and should insurance or other buy out obligation be triggered (or not))!
 
 


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