Exit Clauses

A partnership arrangement is essential when it comes to contributions and profit (or loss) division and liability. If it isn’t in writing then it simply isn’t. An agreement should cover all scenarios if it is done correctly-but get a lawyer to do it.

As far as an exit clause is concerned, it will depend when you want to exit. Obviously if there are problems finacially and one of you wants to pull the pin in 12 months, you can hardly do so and leave all the liabiltiy in the others laps. I would work out maybe a date by which anyone with cold feet wants to get out and the terms of that (eg they lose any future benefit and cash contribution) and then make a decision as to how any party who wants to “exit” at a later date is to be paid out (eg by monthly instalments of an agreed amount or an amount based on a share of the profit made to that pont) otherwise someone may want to walk with his share which the entity cannot pay causing a winding up situation).

It is fairly involved. Do it right.Put all this down on paper then see a lawyer

Good Luck

markk
Happy Hunting
http://www.kentscollections.com

See a lawyer, but before you do, try and work out the following
1. what event can trigger an exit.eg death, incapacity, bakruptcy, desire to leave the venture, desire to force someone out of the venture etc etc.
2. can there be a forced exit – worth considering if someone doesn’t pull his weight, or if one of the unithlders dies would you prefer tp force his estate out rather than have his estate beenficiaries force on you
3. a formula for fixing the exit price sometimes this can be as simple as saying the exit price will be the value of the units as determined by an agreed (named) independent accountant
4. time for payment
5. does the exiting party have the right to sell his units/shares to an incoming person he selects, or do the remaining holders have any right of veto/approval of a new incoming unitholder.

You can do better than looking up forms on the net and blindly applying them. Would you do that if you had to have an operation? Can you imagine buying a scalpel and an anatomy textbook and operating on yourself!!!!!
As a lawyer I would say “see a lawyer”. While alot of pepole whinge about us, as a profession we have been doing this sort of thing for over 1,000 years so there must be some need.