In summary, your shareholder/partner/operating agreement could single-handedly implode your internal succession plan.

A dramatic statement? Yes, we agree it is but it does have significant truth to it.

Many firms have not updated their internal agreement for years, if ever. It is most likely outdated, insufficient or not applicable especially when developing an internal succession solution. Many firms are currently operating outside of their original agreement and that may or may not present additional problems.

Read your agreement and answer these questions as if you are a brand new partner or will soon be made a partner:

We ask you to review these and other questions because your partner or operating agreement is just as important as your “merger” agreement, it is just used internally. When a new partner is merged in it should be viewed similarly to an external merger to a large degree and answer all the same questions. Some firms opt to have an outside industry specific consultant review and or re-write the agreement each time a new partner is admitted. The cost of this review could be a few thousand dollars depending on the firm and the agreement but that is often inexpensive “insurance” to give all partners, new and tenured, the confidence that all considerations have been incorporated.

For more information please read these articles: