Consequences of preferred return provisions in a partnership agreement

Article Abstract:

Preferred return provisions in partnership agreements reward partners who contribute additional capital to the business. Aside from a stipulated return on investment, they are also given priority in income distribution. Different types of preferred returns are analyzed. These are: guaranteed, nonguaranteed, cumulative, noncumulative, compound, noncompound, amortizing, nonamortizing and other variations. Tax and nontax factors in formulatiing preferred return provisions are discussed and examples are given for greater clarification.

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The accountant's role in preparing and amending partnership or LLC agreements

Article Abstract:

Some of the issues accountants usually encounter when dealing with partnership agreements and LLC operating agreements which have not been included in the draft are presented. Accountants should always participate during the early stages in the formation of the partnership. Their input must be obtained when drafting the partnership agreement. Some of the major areas of confusion in the agreement lie in the accounting method, the use of the term 'book' and the misinterpretation of the term 'tax basis.'

Practice, Design and construction, Accountants

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Get it in writing

Article Abstract:

Poor documentation or the lack of documentation of issues concerning accounting firm partnerships can lead to litigation, arbitration or mediation. To avoid legal problems, partnership agreements should be in writing instead of just being sealed with a handshake. An effective written agreement covers as many partnership issues as possible and is reviewed periodically. Partners in Canada without any written agreement should be aware that they are subject to their province's Partnership Act.

Management

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