CONTINUATION
OF INCOME PAYMENTS
AFTER
PARTNER'S RETIREMENT OR DEATH
AGREEMENT
made ________________________ (Month & Day), __________ (Year), among the following persons: ______________________________
______________________________
______________________________
1. Name and
business. The parties hereby
form a partnership to engage in the practice of public accountancy under the
names of _____________________________________ and ___________________________
the principal office to be in ________________________ (Address).
2. Term. The partnership shall begin on
________________________ (Month & Day), __________ (Year) and continue until terminated as herein
provided.
3. Capital. Whenever required in the business of the
partnership, capital shall be contributed by the partners in the proportions in
which they share in partnership profits and losses. This paragraph shall not apply to the estate of a deceased
partner. Each partners capital account
shall be determined and maintained throughout the term of the partnership in
accordance with the requirements of Section 704(B) of the Internal Revenue Code
of 1986, or its counterpart in any subsequently enacted Internal Revenue Code
(the Code), and any of the Treasury Regulations (the Regulations) promulgated
from time to time thereunder.
4. Profit
and loss. The net profits
and losses of the partnership shall be divided and borne in the following
proportions, except that all losses resulting from the wrongful act or gross
negligence of any partner shall be charged to him in full:
__________________________________________________________________________
__________________________________________________________________________
The
senior partners shall have the right to adjust the bases of participation by
junior partners in profits and losses without the consent of the junior
partners. The senior and junior
partners are designated in paragraph 7.
5. Salaries
and drawings. Any partner,
except the estate of a deceased partner, shall have the right to draw against
anticipated earnings, in monthly installments, an amount not in excess of
_____________ percent of his earnings for the preceding year, but in no event
shall a partners withdrawals exceed his proportionate share of partnership
profits. Any amounts so withdrawn shall
be charged against that partners distributive share of the profits of the
partnership business. Any partner shall
have the right, at the end of any calendar year, to withdraw the balance of his
share of the partnership profits for that year. The drawings of partners during the first year of the partnership
shall be agreed upon among all the partners.
6. Interest. No interest shall be paid to partners on any
contributions to capital.
7. Management,
duties, and restrictions.
The partnership shall be composed of the following persons:
1.
_______________________________________________________ (Name and Address)
2.
_______________________________________________________ (Name and Address)
3.
_______________________________________________________ (Name and Address)
The
senior partners shall have the right to admit additional partners upon such
terms as they may determine, but the participation percentage in net earnings
of the estate of a deceased partner shall not be altered nor the period of
participation curtailed. All of the
partners shall participate in the conduct of partnership affairs and each
partner shall devote his entire time thereto.
In matters relating to the routine management of the partnership
business, a decision by the majority of the senior partners shall be binding
upon the partnership, but on questions of firm policy the decision of a
majority of the senior partners shall prevail.
The estate of a deceased partner shall continue as a member of the
partnership as hereinafter provided, but such estate shall have no voice in the
management of the partnership business.
8. Banking. All funds of the partnership are to be
deposited in its name in such checking account or accounts as shall be
designated by the partners. All
withdrawals therefrom are to be made upon checks signed by any senior partner.
9. Books. The partnership books shall be maintained at
the principal office of the partnership, and any partner shall at all times
have access thereto. The books shall be
kept on a cash basis, and shall be closed, balanced, and audited at the end of
each calendar year.
10. Withdrawal
or liquidation. Upon
withdrawal of any partner or upon the voluntary liquidation of the partnership,
the following procedure will be observed:
(A) Withdrawal.
Any partner shall have the right to withdraw from the partnership at the
end of any calendar year. Written
notice of intention to withdraw shall be served upon the other partners at the
office of the partnership at least three months before the end of the calendar
year. The withdrawal of any partner
shall have no effect upon the continuance of the partnership business. The partnership books shall be closed at the
end of the calendar year in the regular way and the withdrawing partner shall
be paid the following amounts: (I) the undrawn portion of the withdrawing
partners share of the partnerships profits, if any, as of the end of the year,
(II) the amount of his capital account
as of the end of the year, (III) the withdrawing partners proportionate share
of any fees received by the continuing partnership subsequent to the end of the
year for accounts receivable or work in process as of the end of the year. In determining the part of the total fee in
which the withdrawing partner shall share, account shall be taken of the
relative importance and value of the work done prior to the end of the year
compared with the work done subsequent thereto. The remaining partners shall have the right to deduct from the
amount payable to the withdrawing partner his proportionate share of any debts
and/or reasonable reserve for liabilities not reflected on the books of the
partnership as of the end of the year.
The remaining partners, together with any new partners, shall have the
right to continue the business under the same firm name.
(B) Liquidation. Should the partners having _______ percent or more of the
interests in the profits and losses of the partnership agree to terminate the
partnership business, the partners shall share in any profits and losses of the
business during the period of liquidation in the same proportions in which they
shared the profits and losses prior to the termination of the partnership
business.
The
proceeds of such liquidation shall be applied in the following order of
priority: (I) to the payment of any debts and liabilities of the
partnership (II) to the setting up of any reserve which the
partners shall reasonably deem necessary to provide for any contingent or
unforeseen liabilities or obligations of the partnership. At the expiration of such period of time as
the partners shall deem advisable, the balance of such reserve remaining after
the payment of such contingency shall be distributed in the manner hereinafter
set forth (III) thereafter, the balance of the proceeds, if any,
shall be distributed in accordance with the positive capital account balances
of the partners, as determined after taking into account all capital account
adjustments for the partnership taxable year during which such liquidation
occurs, and shall be made by the end of such taxable year (or, if later, within
ninety (90) days after the date of such liquidation). For purposes of this subparagraph, a liquidation of the
partnership shall mean a liquidation as set forth in Section
1.704-1(B)(2)(II)(G) of the Regulations.
If,
following the liquidation of a partners interest in the partnership (within the
meaning of Treasury Regulations Section 1.704-1(B)(2)(II)(G)) a partner has a
deficit balance in his capital account (as determined after taking into account
all adjustments to said capital account, including the adjustments for the year
during which such liquidation occurs), such partner shall be unconditionally
obligated to pay the amount of such deficit balance to the partnership by the
end of such taxable year (or, if later, within ninety (90) days after the date
of such liquidation), which amount shall be applied and distributed in
accordance with the provisions of this paragraph. If the surviving partners terminate the partnership before the
expiration of the five-year period following the end of the month in which a
partner dies or retires, the amounts owing to such partner from the
partnership, as hereinafter provided in paragraph 11, shall be paid in full,
out of the liquidation proceeds of the partnership before any sums shall be
paid to the surviving partners. For
this purpose, the earnings attributable to the estate of such partner for the
balance of the five-year period shall be computed on the basis of the average
annual net earnings of the partnership for the two preceding calendar years.
11. Death. Upon the death of any partner, the
partnership business shall not terminate, but shall be continued as a
partnership among the surviving partners and the estate of a deceased partner. The division of income and the payment of
the deceased partners interest in capital, accounts receivable and work in
process shall be as follows:
(A) Income.
The estate of a deceased partner shall participate in the net earnings
and net losses of the partnership for a period of ______ year(s), from the
first day of the month following the month of death of the partner, in the
following proportions:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
The
share of profits to which the estate of a deceased partner is entitled each
calendar year shall be paid to the estate in four quarterly installments, each
of which shall be equal to one fourth of that years participation level. The estates participation level for a given
year shall be equal to _____ percent of the deceased partners or of the estates
participation in the partnerships net profits during the preceding year. Any necessary adjustments shall be made upon
the closing of the books for each calendar year, and the final adjustment shall
be made at the end of the _______ year participation period. Payments to the estate under this paragraph
shall be based on calendar year quarterly periods, the first payment to cover
the calendar year quarter ending next after the death of the partner, and the
final payments to be made at the end of the ______ year period. To absorb the difference between the
deceased partners proportionate interest in the profits of the partnership and
the participation percentage of his estate, the interests of the surviving
partners in the partnership shall be increased in the proportions of their
respective interests as stated in paragraph 4.
(B) Capital. The interest of a deceased partner in the
capital of the partnership shall be determined as of the end of the month in
which his death occurs, and shall be paid to his estate in equal quarterly
installments, together with interest at the rate of ______ percent per annum, over a period of _______ years, the
first payment to be made at the end of the calendar year quarter in which the
death occurs. The deceased partners capital
interest shall equal his capital account as shown on the partnership books at
the beginning of the calendar year in which his/her death occurred, increased
by his/her share of partnership profits or decreased by his/her share of
partnership losses for the period from the beginning of the calendar year in
which his/her death occurred until the end of the month in which his/her death
occurred, reduced by his/her drawings during such period.
(C) Accounts receivable and work in
process. The partnership shall
determine the amount of accounts receivable billed but not yet paid at the end
of the month in which his death occurred.
The interest of a deceased partner in the accounts receivable shall be
the same percentage as his percentage of the income in paragraph 11(A). This amount shall be paid to his estate in
equal quarterly installments, together with interest at the rate of __________
percent per annum, over a period of _________ year(s), the first payment to be
made at the end of the calendar quarter in which the death occurs. The interest of a deceased partner in the
work in process shall be paid to his estate in equal quarterly installments,
together with interest at the rate of ________ percent per annum, over a period
of ________ years, the first payment to be made at the end of the calendar
quarter in which the death occurs. The
interest of a deceased partner in the work in process at the time of death
shall be determined by the surviving partners as of the end of the month in
which his death occurs. The amount so
payable with respect to the work in process shall be capitalized on the
partnership books. When the partnership shall receive payment on account of
such work in process, the share attributable to the decedent shall be credited
to that account, and shall be deducted in computing the amount otherwise
payable to the estate under subdivision (A) of this paragraph.
12. Retirement. A partner may retire from the partnership at
the end of the calendar year upon _______ days prior notice to the
partnership. Upon the retirement of any
such partner, the partnership business shall not terminate but shall be
continued as a partnership among the surviving partners and the retired
partner. The division of income and the
payment for the retiring partners interest in capital, accounts receivable, and
work in process shall be determined in the same manner as upon a partners death
(the provisions which are contained in paragraph 11), treating for this purpose
the date of retirement as the date of death.
13. Use of
name of deceased partner.
The surviving partners shall have the right to continue to use the name
of any deceased partner in the partnership name.
14. Expulsion. Should the partners owning ________ percent
or more of the interests in the profits and losses of the partnership determine
that a partner should be expelled from the partnership, such partner must
withdraw from the partnership. Such
partner shall withdraw from the partnership on the last day of the month during
which the partnership notifies such partner in writing of his expulsion. The partnership shall make such payments as
may be due the expelled partner on the same basis as if the expelled partner
had withdrawn from the partnership.
In
witness whereof the parties have signed this Agreement.
_________________________ ________________
Signature
Date
_________________________ ________________
Signature
Date
_________________________ ________________
Signature
Date