Counsel
Ask an expert!
Legal, accounting and compliance advice from qualified professionals.
The firm, in this case, should value the company and the partner retiring from the firm has a proportionate value obtained after this valuation. The other partners can put in more capital to pay out the retiring partner and then the share of the retiring partner is transferred to remaining partners in the ration this additional capital was raised.
...
Wazzeer Professional Network
ProfessionalWhat is the legal compensation entitled to a retiring partner, who wants to voluntary exit from the partnership? The situation, in this case, is a running and profitable business, where one partner wants to exit the partnership. The business has consistently provided returns for several years.
The partners cannot agree on the compensation claimed by the partner choosing to retire. The retiring partners claim is to have the proportionate value of what shows on the assets side of the last year's balances sheet. This does not make sense, as it can be done only by selling key assets of the company that are essential. The rest of the partners are agreeable to give between 10 to 12 times of highest earnings in past three years in addition to the proportionate share of what is shown in the Capital Account. One CA was of the opinion, that legally the retiring partner is only entitled to the proportionate part of the latest value in Capital Account. Can anyone provide a clarification?
-
Wazzeer Professional Network
ProfessionalThe firm, in this case, should value the company and the partner retiring from the firm has a proportionate value obtained after this valuation. The other partners can put in more capital to pay out the retiring partner and then the share of the retiring partner is transferred to remaining partners in the ration this additional capital was raised.
The valuation of the company should be such that it is applicable to all partners. If the retiring partner makes a counteroffer to purchase the share of all the other partners on the same valuation the other partners should be ready to sell. Such a valuation is called acceptable valuation of the company.
To take this discussion forward, all you have to do is ->"Get your Wazzeer"
almost 4 years ago
View answer
What is the legal compensation entitled to a retiring partner, who wants to voluntary exit from the partnership? The situation, in this case, is a running and profitable business, where one partner wants to exit the partnership. The business has consistently provided returns for several years.
The partners cannot agree on the compensation claimed by the partner choosing to retire. The retiring partners claim is to have the proportionate value of what shows on the assets side of the last year's balances sheet. This does not make sense, as it can be done only by selling key assets of the company that are essential. The rest of the partners are agreeable to give between 10 to 12 times of highest earnings in past three years in addition to the proportionate share of what is shown in the Capital Account. One CA was of the opinion, that legally the retiring partner is only entitled to the proportionate part of the latest value in Capital Account. Can anyone provide a clarification?
-
Wazzeer Professional Network
ProfessionalThe firm, in this case, should value the company and the partner retiring from the firm has a proportionate value obtained after this valuation. The other partners can put in more capital to pay out the retiring partner and then the share of the retiring partner is transferred to remaining partners in the ration this additional capital was raised.
The valuation of the company should be such that it is applicable to all partners. If the retiring partner makes a counteroffer to purchase the share of all the other partners on the same valuation the other partners should be ready to sell. Such a valuation is called acceptable valuation of the company.
To take this discussion forward, all you have to do is ->"Get your Wazzeer"
almost 4 years ago
Looking to hire a professional from our handpicked community?
Explore our services, submit your request and let us do the rest for you.