Mistake: No Partnership Agreement

“We never had a partnership agreement.”

My questions is, “Why?” Twenty-five years ago my clients began their firm as two guys who had attended college together. The firm now has 20 employees and the firm owners have no partnership agreement. It is true time flies, but that’s no excuse for not taking the time to manage your small but emerging practice.

Among its many attributes, a partnership agreement defines roles, responsibilities, buy and sell provisions, the acquisition and dispositions of shares, the process of nominating new partners or removing old ones, and voting rights partners. These should be crafted early in a firm’s growth and development or at the onset of a partnership, with a full recognition of the future of the company you’d like to develop. They should not be defined after the fact, in haste, or once a partnership is coming towards its end. At that point, perspectives are often skewed in favor of an individual or circumstance.

Seek and secure wise and informed counsel on this topic. It is much like surgery. While there are “Do-It-Yourself” books on almost any subject, I contend that “Do-It-Yourself” doesn’t work with surgery. Wise counsel can provide you with guidance, direction and support in the development of an appropriate agreement.

Seek resources that will allow you to ask intelligent and informed questions. Here’s one of my favorite resources addressing this topic: the 14th Edition of the Architect’s Handbook of Professional Practice, published by Wiley (15th Ed. due out in November 2013). Industry Speaks™ is also reviewing books on this topic, so stay tuned for other recommended reading sources.

A partnership agreement regulates the life-blood of your firm. It protects your collective assets and provides guiding principles and tenets for partnership. You owe it to yourself, your partner(s) and your staff to have one.

Karen Compton, CPSM. Karen Compton is principal of A3K Consulting (Glendale, CA), a business development and strategic planning firm specializing in the architecture, engineering and construction industries. Ms. Compton is also the founder of Industry Speaks™, a web-based business-to-business portal that connects AEC firms with experienced consultants, provides peer reviews of consultants, reports on key industry trends, and publishes expert reviews of professional courses and books. Contact her at kcompton@a3kconsulting.com.