Are Partner Buyout Plans Just Ponzi Schemes?

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.