Partnership and Operating Agreement Retirement Provisions: Transition Plans, Vesting and Payout Periods, Clawbacks

A live 90-minute CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Thursday, June 2, 2022 (in 13 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE webinar will advise counsel on how to address specific retirement provisions in partnership and operating agreements. The panel will discuss how transition plans can be established prospectively, the need for both vesting and payout periods, and what type of clawbacks the business should consider from founders. The panel will address best practices in both negotiating retirement provisions in origination documents and how and when such provisions should be reevaluated.

Description

Small businesses often give little thought to what happens when one of the owners decides to retire, but addressing these concerns at the inception of the business allows all parties to consider what may be important in the future.

Any partnership agreement or operating agreement should include a transition plan--it is critical to ensure the business retains the clients, skills, and abilities of the retiring partner. The transition plan itself is something that will be developed by the retiring partner in consultation with, and with the ultimate approval of, the managing partner or owner. It is quite common to have penalties built into the agreement for failure to give the requisite notice or failure to adhere to a transition plan.

Retirement benefits typically have a defined vesting period--20 years is not uncommon. Each company can decide to give partial or full credit for any years a partner or owner spent as an income partner. Likewise, the retirement payout period is typically 10 years, with the total aggregate amount payable to retired partners each year usually capped at some portion of the annual revenue or net income of the business.

There has been a recent revival in retirement "clawback" provisions. These provisions essentially reduce otherwise expected retirement payments if the retired partner's book of business or prior clients do not remain with the company after the partner's retirement. Clawback provisions are intended to encourage a well-executed retirement transition that accounts for the company's best interests.

Listen as our expert panel provides best practices on the considerations every startup should address in its organizational documents regarding retirement provisions. The panel will adiscuss these and other key provisions that owners must include to avoid future conflict.

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Outline

  1. Partnership and operating agreements
    1. Transition plans
    2. Vesting period
    3. Payout period
    4. Retirement payment protections
    5. Retirement ages: early and mandatory retirement
    6. Working after retirement
    7. Life insurance
    8. Clawbacks
    9. Transitioning retirement systems
  2. Founder's agreements
  3. Other best practices

Benefits

The panel will address these and other key issues:

  • What are the retirement provisions that owners should consider in their organizational documents?
  • When should a business include clawbacks in their retirement provisions?
  • What are the differences in incorporating retirement (and other) provisions into organizational documents versus a founder's agreement?

Faculty

Garza, Len
Len Garza

Principal
GARZA Business & Estate Law

For over a decade, Mr. Garza has represented companies, business owners, and other stakeholders regarding a wide...  |  Read More

Gorby, Michael
Michael J. Gorby

Founder/Partner
Gorby Peters & Associates

Mr. Gorby has tried hundreds of cases and handled thousands of matters for corporations and individuals across the...  |  Read More

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