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Back to Forms for 'Partnerships'.


COMPENSATION TO PARTNERS UPON

COMPENSATION TO PARTNERS UPON

LIQUIDATION OF CORPORATION

 

 

AGREEMENT made ________________________ (Month & Day), ________ (Year), among the following persons:          _______________________________________

                                                         _______________________________________

                                                         _______________________________________

 

         1.  Name and business.  The parties hereby form a partnership under the name of _________________________ to engage in the business heretofore conducted by ____________________________, a ______________________ (State) corporation in liquidation, and in such other businesses as the parties may agree upon. The office of the partnership shall be located in _________________________________________________

 

         2.  Term.  The partnership shall begin on ________________________ (Month & Day), ________ (Year), and shall continue until ________________________ (Month & Day), ________ (Year), and thereafter from year to year until terminated as herein provided.

         3.  Capital. The capital of the partnership shall consist of all the assets, subject to all the liabilities, of _______________________________________, to be transferred to the partnership on ________________________ (Month & Day), ________ (Year), as set forth in a balance sheet to be made as of the close of business on ________________________ (Month & Day), ________ (Year) and to be attached hereto as Exhibit A.  The initial capital accounts of the partners shall be equivalent to the following interests in the capital of the partnership:

 

 

___________________________________                       ________ percent.

 

___________________________________                       ________ percent.

 

 

___________________________________                       ________ percent.

 

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 of the partnership shall be divided and the net losses of the partnership shall be borne in the following proportions:

 

 

___________________________________                       ________ percent.

 

 

___________________________________                       ________ percent.

 

 

___________________________________                       ________ percent.

 

         5.  No interest.  The additional share of profits shall inure to any partner by reason of his capital account being proportionately in excess of the capital accounts of the others, except as provided in paragraph _________.

 

         6.  The profits and losses.  The Profits and loss of the partnership shall be determined in the manner in which the partnership reports its income and expenses for federal income tax return purposes.

         7.  Salaries and drawings.  Each of the managing partners shall receive $_________ per ______ as compensation for his services to the partnership.  All salaries and commissions shall be deducted from the net profits of the partnership, as an expense thereof, in determining the partners distributive shares of the net profits.  If during any year the salaries and commissions paid shall exceed the net profits of the partnership, computed without the deduction of such salaries and commissions, the excess shall be treated as a loss of the partnership to be borne by the partners in the proportions stated in paragraph 4.  In addition to the salaries herein before provided, and unless modified with the consent of all the partners, each partner shall have a drawing account as follows:

 

 

___________________________________                       $___________ quarterly.

 

 

___________________________________                       $___________ quarterly.

 

 

___________________________________                       $___________ quarterly.

 

Any amounts so withdrawn shall be charged against the respective partners distributive share of the profits of the partnership business.  Each partner shall have the right, at the end of any accounting year, to withdraw the balance of his share of the partnership profits for that year or any prior year.  The share of partnership profits not withdrawn by any partner shall be added to his capital account.  Notwithstanding the foregoing, no amount shall be withdrawn by any partner if such drawing will impair his original capital account. 

 

         8.  Interest.   Each partner shall be paid interest at the rate of _____ percent per annum on the average balance in his capital account during the immediately preceding accounting year, such payments to be made in equal quarterly installments during the year, and to be charged as expenses of the partnership business.

         9.  Management, duties, and restrictions.  The managing partners are as follows:

 

 

1.  __________________________________________________ (Name and Address)

 

 

2.  __________________________________________________ (Name and Address)

 

 

3.  __________________________________________________ (Name and Address)

 

         10.  The responsibilities of each of the managing partners are as follows:

 

1.  _______________________________________________________________________

 

2.  _______________________________________________________________________

 

3.  _______________________________________________________________________

 

No partner shall, without the consent of the other partners, endorse any note, or act as an accommodation party, or otherwise become surety for any person.  Any managing partner shall have the right to draw checks upon any bank account of the partnership, and to make, deliver, and accept commercial paper in connection with the business of the partnership. Except with the consent of all of the managing partners, no partner shall on behalf of the partnership borrow or lend money, or make, deliver, or accept any extraordinary commercial paper, or execute any mortgage, security agreement, bond, or lease, or purchase or contract to purchase, or sell or contract to sell any property for or of the partnership, other than the type of property bought and sold in the regular course of its business.  No partner shall, except with the consent of the other partners, assign, mortgage, grant a security interest in, or sell his share in the partnership or in its capital assets or property, or enter into any agreement as a result of which any person shall become interested with him in the partnership.

 

         11.  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 managing partners.

 

         12.  Books.  The partnership books shall be maintained at the principal office of the partnership, and each partner shall at all times have access thereto.  The books shall be kept on a cash basis for a fiscal year commencing ________________________ (Month & Day), ________ (Year) and ending ________________________ (Month & Day), ________ (Year) and shall be closed and balanced at the end of each fiscal year.  An audit shall be made as of the closing date.

 

         13.  Retirement.  Any partner shall have the right to retire from the partnership at the end of any fiscal year.  Written notice of intention to retire shall be served upon the other partners at the office of the partnership at least three months before the end of the fiscal year.  The retirement of any partner shall have no effect upon the continuance of the partnership business.  The remaining partners shall have the right either to purchase the retiring partners entire interest in the partnership or to terminate and liquidate the partnership business.  If the remaining partners elect to purchase the interest of the retiring partner, they shall serve notice in writing of such election upon the retiring partner at the office of the partnership within _______________ month(s) after receipt of his notice of intention to retire.  If a remaining partner shall not elect to participate in the purchase of the retiring partners interest, he shall serve written notice of his intention not to participate upon the other partners at the office of the partnership within ___________ month(s) after the service of the voluntarily retiring partners notice of intention to retire.  Such non participation notice shall be deemed to be an irrevocable notice of intention to retire by the non-electing partner and a tender by him to the other partners of his entire partnership interest which shall be subject to purchase by the other partners upon the same terms and conditions applicable to the interest of the partner giving voluntary notice of intention to retire. 

 

(A)  If the remaining partners elect to purchase a retiring partners interest in the partnership, the percentages of purchase of the retiring partners interest, the purchase price, and the method of payment shall be the same as stated in paragraph 11 with reference to the purchase of a decedents interest in the partnership.

 

(B)  If the remaining partners do not elect to purchase a retiring partners interest in the partnership, the managing partners shall proceed with reasonable promptness to liquidate the business of the partnership.  The procedure as to liquidation and distribution of the assets of the partnership business shall be the same as stated in paragraph 11 with reference to termination in the event of a partners death.

 

         14.  Death.  Upon the death of any partner, the surviving partners shall have the right either to purchase the decedents entire interest in the partnership or to terminate and liquidate the partnership business.  If the surviving partners elect to purchase the decedents interest, they shall serve notice in writing of such election, within _______ month(s) after the death of the decedent, upon the executor or administrator of the decedent, or, if at the time of such election no legal representative has been appointed, upon any one of the known legal heirs of the decedent at the last known address of such heir.  If a surviving partner shall not elect to participate in the purchase of the decedents interest, he/she shall serve written notice of his intention not to participate upon the other surviving partners at the office of the partnership within ______ month(s) after the death of the decedent.  Such non participation notice shall be deemed to be an irrevocable notice of intention to retire by the non electing partner and a tender by him to the other partners of his entire partnership interest which shall be subject to purchase by the other partners upon the same terms and conditions applicable to the interest of the deceased partner. 

 

(A)  If the surviving partners elect to purchase the decedents interest in the partnership, the purchase price shall be equal to the decedents capital account as shown on the partnership books, increased by his share of partnership profits or decreased by his share of partnership losses (plus interest on capital in accordance with the provisions of paragraph 6) for the period from the beginning of the accounting year in which his death occurred until the date of his/her death, and decreased by withdrawals during such period.  No allowance shall be made for goodwill, trade name, patents, or other intangible assets, except as those assets have been reflected on the partnership books immediately prior to the decedents death.  Each of the surviving partners shall have the right to purchase a portion of the decedents partnership interest in the proportion which his interest in the profits of the partnership bears to the interest of the other surviving partners in the profits of the partnership.  The purchase price shall be paid with interest at the rate of _______ percent per annum in four semiannual installments beginning six months after the date of death of the decedent.  In the event of the purchase of the interest of the decedent, the continuing partnership shall have the right to use the firm name of the partnership. 

 

(B)  If the surviving partners do not elect to purchase the decedents interest in the partnership, the surviving managing partners shall proceed with reasonable promptness to liquidate the business of the partnership.  The surviving partners and the estate of the deceased partner shall share in the profits and losses of the business during the period of liquidation in the same proportions in which they shared such profits and losses prior to the death of the decedent, except that the decedents estate shall not be liable for losses in excess of the decedents interest in the partnership at the time of his death; so long as any surviving partner shall devote his full time to the liquidation of the partnership business, he shall receive a salary at the same rate as he received immediately prior to the decedents death. 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 ____________ days after the date of such liquidation), which amount shall be applied and distributed in accordance with the provisions of this paragraph.

 

In witness whereof the parties have signed this Agreement.

 

 

 

____________________________                                     ______________

Signature                                                                               Date

 

 

 

____________________________                                     ______________

Signature                                                                               Date

 



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