Partnership agreements: MHA MacIntyre Hudson explains everything you need to know

Key considerations

  • How much will it cost you, both now and in the future?
  • What are the tiers of partnership and what are the steps to full equity?
  • Which covenants and policies are likely to affect you? e.g. pension, SMP, SPP, SSP etc.
  • Does it match with your own goals and aspirations for the future?
  • What are the implications throughout your career?
  • What level of financial information about the firm is available to you?
  • Profit share and extraction (see below)
  • Who pays your tax and on what basis of earning? Will the partnership hold back some of your profits to pay for tax?

Make sure that your interests as an individual are fully considered and keep in mind how well matched the firm and partnership agreement is to your attitude to risk, your life stage and any agreements related to holiday, maternity, paternity pay etc.

Profit share

  • What will your profit share be and how is it calculated?
  • How are drawings calculated (i.e. how and when can you access your share of the profits)?
  • What can you take home each month and is it even across the year or are there bonus distributions?
  • When is profit allocated?
  • What (if any) are the clawbacks?

Restrictive covenants

As a partner, you are there to represent the firm as an agent of that firm. As such, most partnership agreements include clauses to restrict business interests partners may wish to enter in to without agreement of the board, and to prevent soliciting clients and poaching staff or other LLP members on exiting the partnership, for a specified period of time. There are also usually specific rules for retirement as well.

How we can help

Partners at MHA MacIntyre Hudson have a wealth of experience in this area and can answer any questions you may have, or offer confidential advice if you have any concerns.

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