14 Partner Agreement Issues in Mergers

Two businessmen holding giant puzzle pieces in silhouette against a sunriseMake sure you're looking at the big picture.

By Marc Rosenberg

This post applies only to transactions that are true mergers, which require the sellers to sign the buyer’s partner agreement.

MORE: Partner Agreement Issues Affecting Women | Mandatory Retirement: Pros and Cons (And Is It Legal?) | Deciding How to Allocate Partner Income | Making Partner: Today’s 15 Essential Skills and Traits | How to Specify Managing Partner Duties | When Votes Must Be Taken, What Are the Options? | A Crash Course in Partner Retirement/Buyout Plans | Protect Your Business with a Solid Partner Agreement

In a sale, the owner(s) of the seller don’t sign the buyer’s partner agreement because they won’t become owners of the buyers.
READ MORE →

Partner Agreement Issues Affecting Women

Two businesswomen sitting at table and talking in office courtyardThe biggest issue? How part-time partners are treated.

By Marc Rosenberg

Yes. Yes.  I understand that the title of this post may be offensive to both men (why do we need special rules for women?) and women (why do we need to be singled out – isn’t it a given in the 21st century that women and men should be treated equally?).

MORE: Mandatory Retirement: Pros and Cons (And Is It Legal?) | Partner Duties, Prohibitions and Grounds for Expulsion | Principals Who Aren’t CPAs | Why Non-Compete and Non-Solicitation Covenants Matter | Handling Pay During the Disability of a Partner | Why Voting Isn’t Such a Big Deal
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

The good news is that I don’t see many partner agreements that blatantly discriminate against women.
READ MORE →

Mandatory Retirement: Pros and Cons (And Is It Legal?)

It depends.

By Marc Rosenberg

Of all the issues involved in CPA firm governance, mandatory retirement is one of the most hotly contested and debatable provisions in a partner agreement.

MORE: Partner Duties, Prohibitions and Grounds for Expulsion | Quick Tip: Partners Investing in Clients | Why You Might Want an Executive Committee | Buyout When a Partner Dies | Why and How New Partners Buy In | A Crash Course in Partner Retirement/Buyout Plans
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

First, let’s clarify what we mean by “mandatory retirement.”
READ MORE →

Partner Duties When Things Go Really Bad: Prohibitions and Grounds for Expulsion

Midsection of businessman moving out with cardboard box from officeWhat does "all of their time and attention" mean?

By Marc Rosenberg

I’ve read hundreds of partner agreements over 20 years and I am unable to meaningfully distinguish between the following:

  • Partner duties (what partners must do to keep their jobs)
  • Partner prohibitions (what partners cannot do)
  • Grounds for expulsion (what actions partners may do that are serious enough to cause their dismissal from the firm)

MORE: Quick Tip: Partners Investing in Clients | Deciding How to Allocate Partner Income | Making Partner: Today’s 15 Essential Skills and Traits | How to Specify Managing Partner Duties | When Votes Must Be Taken, What Are the Options?
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

I’ve seen countless different ways that these items are presented in partner agreements. For years I’ve asked these questions:
READ MORE →

Quick Tip: Partners Investing in Clients

BONUS: Sample agreement language.

By Marc Rosenberg

During my career, I’ve seen partners come to blows over this.

MORE: Deciding How to Allocate Partner Income | Principals Who Aren’t CPAs | Why Non-Compete and Non-Solicitation Covenants Matter | Handling Pay During the Disability of a Partner | Why Voting Isn’t Such a Big Deal | What’s in a (Firm) Name? | Protect Your Business with a Solid Partner Agreement
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

One partner has a non-attest client who offers an opportunity to invest in the client’s business. A very common example is a client who is a real estate syndicator. This can often be quite lucrative for the partner.
READ MORE →

Deciding How to Allocate Partner Income

Gavel resting on $100 bills8 aspects that might fall to your compensation committee.

By Marc Rosenberg

CPA firms have a habit of making frequent changes – some major and some minor – to their system and methodology of allocating partner income, just as a baseball team tweaks its roster of players during a long, grueling season.

MORE: Principals Who Aren’t CPAs | Non-Equity Partners: Why Have Them? | Why You Might Want an Executive Committee | Buyout When a Partner Dies | Why and How New Partners Buy In
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Because of this, firms are advised to keep the wording on partner compensation in their partner agreements as general as possible. This avoids the need to change the agreement every time the income allocation system is modified.
READ MORE →

Principals Who Aren’t CPAs

Businesspeople having a meeting over coffee sitting together at a table discussing a document, young man and two middle-aged women present8 points worth noting.

By Marc Rosenberg

For 20 years or more, the CPA profession has been expanding services beyond traditional audit, accounting and tax, supplementing its portfolio with a wide variety of consulting services. Indeed, in recognition of this, most CPA firms’ logo states something to the effect of “CPAs and Consultants.”

MORE: Non-Equity Partners: Why Have Them? | Making Partner: Today’s 15 Essential Skills and Traits | How to Specify Managing Partner Duties | When Votes Must Be Taken, What Are the Options? | Ownership Percentage and Capital Accounts
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

Some firms have CPAs on board who provide consulting services. Other firms hire outside, non-CPA consultants in areas such as technology, wealth management, M&A and health care.
READ MORE →

Non-Equity Partners: Why Have Them?

10 sample provisions.

By Marc Rosenberg

In a CPA firm, the equity partners are the “drivers.” They bring in business, retain clients by providing great service, lead others and develop staff into leaders. They drive the firm’s revenues and profits. Their talent, leadership skills, personality and work ethic enable the organization to achieve excellence.

MORE: Making Partner: Today’s 15 Essential Skills and Traits | Why Non-Compete and Non-Solicitation Covenants Matter | Handling Pay During the Disability of a Partner | Why Voting Isn’t Such a Big Deal | What’s in a (Firm) Name? | Protect Your Business with a Solid Partner Agreement
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

All organizations need drivers to excel beyond the competition, to exceed being average. Sports teams, governments, charities, orchestras and yes, CPA firms all need drivers. An organization that lacks drivers will slide to average or worse, mediocrity.
READ MORE →

Making Partner: Today’s 15 Essential Skills and Traits

Do you have what it takes? Bonus: Six boxes to check off, and seven tough questions.

By Marc Rosenberg

What is the right stuff to earn a promotion to partner? This is one of several questions that if asked of ten partners from different firms, you may get ten different answers.

MORE: Why You Might Want an Executive Committee | How to Specify Managing Partner Duties | When Votes Must Be Taken, What Are the Options? | Ownership Percentage and Capital Accounts | 5 Key Reasons to Have a Partner Agreement

GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

I have worked the following script dozens of times at partner retreats: I ask the group what it means to be a partner and write their responses on a flipchart. When we’re done, one of the partners yells out “Oh no. None of us qualifies!” And because the truth is often said in jest, this retort is no joke.

READ MORE →

Why Non-Compete and Non-Solicitation Covenants Matter

Businessman sitting in office and reading documentsBONUS: A sample agreement.

By Marc Rosenberg

"Non-compete" and "non-solicitation" are two terms often used interchangeably. Though they are similar, there are important differences.

MORE: Why You Might Want an Executive Committee | How to Specify Managing Partner Duties | When Votes Must Be Taken, What Are the Options? | Ownership Percentage and Capital Accounts | 5 Key Reasons to Have a Partner Agreement
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

For the sake of brevity, we use the term “non-competes” to refer to both covenants.
READ MORE →

Why You Might Want an Executive Committee

Business people having meeting10 specific duties.

By Marc Rosenberg

As firms evolve in size, many things need to change.

MORE: How to Specify Managing Partner Duties | Handling Pay During the Disability of a Partner | Why Voting Isn’t Such a Big Deal | What’s in a (Firm) Name? | Protect Your Business with a Solid Partner Agreement
GoProCPA.comExclusively for PRO Members. Log in here or upgrade to PRO today.

One of the biggest changes over time is how the firm is managed.
READ MORE →