When you merge your accounting firm, there will be a number of legal documents and agreements that you’ll need to draft and sign. None are more important than the partnership agreement. This document sets out what each of the partner’s responsibilities in the ownership of the business is. For there to be no disagreements or conflict down the line, this binding agreement needs stating in clear and comprehensive terms. If you are in the process of drawing up your partnership agreement for your accounting firm, ensure you include these essential items:
Detail each partner’s contribution
Contributions should not only include the amount of money each partner will invest in the business, but also the responsibilities, time and effort (current and future) each will offer as well as the list of clients they will bring with them into the partnership.
How will profits be distributed?
The distribution of profits can potentially be a cause for contention if terms are not set out in a partnership agreement. The agreement should be specific on the amount or percentage of the profits each partner will receive. Other details can include whether or not each partner will receive a salary and the salary amount.
Include a non-compete clause
The future is uncertain in life as it is in business. Sometimes a partner may wish to withdraw from an accounting firm which then poses critical questions for the ownership and sustainable future of the business. A non-compete clause will ensure that the partner is prevented from leaving to set up a new business with the firm’s clients.
Establish a decision-making structure
Over time in the day-to-day management of the firm, decisions will have to be made. Which partner will have the ultimate say? Are there certain types of decisions that will be made by one particular partner? Set up a clear structure for long-term decision making to keep your firm conflict-free.
Decide on how conflicts are to be addressed
Conflicts and disputes can turn ugly which is why it is important to establish a dispute resolution process. Will mediation form part of the process? Or arbitration? Don’t leave the matter until your firm is faced with a dispute to set out a process.
Need more advice on drawing up a comprehensive partnership agreement for your accounting business? DMY & Associates has unmatched expertise in structuring partnership agreements for accounting practices. Contact us today to find out more.
Related Tag: Mergers and Acquisitions for Accountants