Buyout When a Partner Dies

Older businessman leaning back thinkingIs the firm's life insurance up to date? Probably not.

By Marc Rosenberg

It's a tough question, but one that must be asked: In the event of a partner's death, does the firm wish to accelerate the buyout?

MORE: When Votes Must Be Taken, What Are the Options? | Why Voting Isn’t Such a Big Deal | What’s in a (Firm) Name? | Protect Your Business with a Solid Partner Agreement
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There are two ways to do so: accelerate vesting or accelerate the payment schedule.
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When Votes Must Be Taken, What Are the Options?

Overhead shot of eight businesspeople meeting around a table5 ways to vote, plus how to set a supermajority.

By Marc Rosenberg

We've established that voting is overrated and that most firms rarely vote.

MORE: Why Voting Isn’t Such a Big Deal | Why and How New Partners Buy In | A Crash Course in Partner Retirement/Buyout Plans | Protect Your Business with a Solid Partner Agreement
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Sometimes, though, it's necessary. But how?
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Why Voting Isn’t Such a Big Deal

Overhead view of five businesspeople discussing something at a table with an open laptop nearbyWhat about non-equity partners?

By Marc Rosenberg

Voting is a highly overrated privilege of being a partner.

MORE: Why and How New Partners Buy In | Ownership Percentage and Capital Accounts | 5 Key Reasons to Have a Partner Agreement
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When you don’t have a vote, it seems desirous and enviable. It appears to be a very special privilege enjoyed only by the firm’s elite. Having a vote is synonymous with ownership, power and prestige.
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Why and How New Partners Buy In

Businessman signing document as another looks on7 key provisions.

By Marc Rosenberg

Let’s start with a very basic, standard concept in the business world: A partner is an owner.

MORE: Why and How New Partners Buy In | Ownership Percentage and Capital Accounts | 5 Key Reasons to Have a Partner Agreement
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In any business, not just CPA firms, ownership is not free. Because partners are owners, they have to purchase a part of a company, for money, to acquire an ownership share.
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Ownership Percentage and Capital Accounts

Cut pie chart on plate flanked by fork and knife3 ownership percentage problems and 4 provisions for the capital section.

By Marc Rosenberg

The term “ownership percentage” has wrought havoc in CPA firm operations for decades. How so?

MORE: What’s in a (Firm) Name? | A Crash Course in Partner Retirement/Buyout Plans | 5 Key Reasons to Have a Partner Agreement | Protect Your Business with a Solid Partner Agreement
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First, let’s take a step back. There are five primary ways that ownership percentage may impact a firm and its partners:

  1. Determining new partner buy-in
  2. Allocating partner income
  3. Determining partner retirement/buyout benefits
  4. Allocating the proceeds of the firm's sale to the partners
  5. Voting

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What’s in a (Firm) Name?

Post with two signs, "same" and "change"There are reasons to change, but don't do it without reflection.

By Marc Rosenberg

This will be short because this area is cut and dried. Let's focus on how a firm's name affects the way it is managed.

MORE: A Crash Course in Partner Retirement/Buyout Plans | 5 Key Reasons to Have a Partner Agreement | Protect Your Business with a Solid Partner Agreement
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There are two primary scenarios to examine.
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A Crash Course in Partner Retirement/Buyout Plans

3 issues to decide and 25 main provisions to include.

By Marc Rosenberg

When firms call me for help on their partner agreement, I immediately ask this question: “Do you want help with your entire partner agreement or just the retirement/buyout part?” Two-thirds of the time, they want to address only the retirement plan.

MORE: 5 Key Reasons to Have a Partner Agreement | Protect Your Business with a Solid Partner Agreement
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My practice in the area of CPA firm partner agreements consists of two parts:

  • The partner retirement/buyout plan.
  • Everything else. I often refer to this as the general partner agreement.

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5 Key Reasons to Have a Partner Agreement

Plus what can happen if you don't.

By Marc Rosenberg
Partner Agreement Essentials

What is a partner agreement?

According to nolo.com, “A partner agreement spells out the rights and responsibilities of the firm’s owners.  Without one, firms will be ill equipped to settle or avoid conflicts because if certain key passages are missing or written improperly, the courts will intervene in ways that the partners may not like. A partner agreement allows the firm’s partners to structure their business relationships with each other in ways that suit their desires, needs and preferences.”

MORE ON PARTNERSHIP: Protect Your Business with a Solid Partner Agreement | How Business Entity Type Affects Partner Income | Equity Vs. Non-Equity Partners | Partner Pay in Retirement Transition Period | Buyout: The Flip Side of Buying In
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But most readers probably knew this definition, so it might not be very illuminating. Let’s try this one.
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Protect Your Business with a Solid Partner Agreement

Number 6Plus 6 ways they've changed over the years.

By Marc Rosenberg
Partner Agreement Essentials

Buying a family home is one of the the biggest investment most people make in their lives. And because most of us are not real estate experts, we protect ourselves by engaging an attorney to ensure that the purchase is handled correctly.  We don’t hesitate for a moment to invest a few thousand dollars of attorney fees to hire an expert.

MORE ON PARTNERSHIP: How Business Entity Type Affects Partner Income | What Partnership Gets You (and Doesn’t) | 5 Cautionary Tales in Partner Compensation | Partner Pay in Retirement Transition Period | 23 Key Provisions in a Partner Buyout | Management Stipends: Who, How and Why | When a Firm Tanks While a Partner Soars | Research Results: How Firms Pay New Partners | What Does Buy-In Buy? | How Profitability Affects Income Allocation | Keys to Bringing in New Partners
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Being a partner in a CPA firm should be no different.
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Technology Playing Center Stage in CPA Profession

Woman using midair interfaceAlso: Retirees who want their buyouts had better transition their clients.

By Marc Rosenberg
Rosenberg MAP Survey

Anyone knowledgeable about the state of the CPA firm industry would agree that technology is playing center stage

The potential of blockchain, artificial intelligence and data analytics is set to transform CPA firm technology in the same way that previous blockbuster inventions – PCs, laptops, the Internet and software – did that almost instantly made obsolete the manual work CPAs painstakingly performed for decades.

Every year, the authors of the Rosenberg MAP Survey ask the industry’s top consultants to share their observations of what they are seeing at CPA firms. Specifically, they are asked the following questions: READ MORE →

New Survey: Profit per Partner Hits $430k

Two reasons it will just keep getting better.

By Marc Rosenberg
The Rosenberg MAP Survey

It’s a great time to be a CPA, with exciting news from the 19th annual Rosenberg MAP Survey.

Profits, as measured by income per equity partner, are $430,000, up 6% from $406,000 in the prior year.

 

More from the Rosenberg MAP Survey: Next Generation Balking at Buyouts  | Embracing New Technology a Must  |  Offshoring On the Rise  |  Recruiting and Retention Are Challenges   |  Technology Will Solve Labor Shortages   |  Firms Must Build Their Benches

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The increased profits were due to:

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