Limited Liability Partnership Agreement
of
, L.L.P.
(Name of Partnership)
This Limited Liability Partnership Agreement is made and entered into as of the
day of , 20 by and among John Doe
,
hereinafter called Doe ; Mary Smith , hereinafter called Smith ;
and John Roe , hereinafter called Roe , each of whom is
referred to herein as a Partner. The Partners hereby form a limited liability partnership, herein
called the Partnership under the laws of the State of for the purpose of
(Name of State)
(describe business of Partnership)
and agree to operate the Partnership pursuant to the terms and provisions hereinafter set forth.
I. Definitions.
A. Capital Account means the Capital Account maintained for each Partner
pursuant to Section VII(C).
B. Capital Contribution means, with respect to any Partner, the amount of money
and the initial Gross Asset Value of any property (other than money) contributed to the
Partnership with respect to the Partnership interest held by such Partner. For purposes of
this Paragraph, money contributed to the Partnership does not include increases in any
Partner's share of Partnership liabilities pursuant to Code § 752(a).
C. Code means the Internal Revenue Code of 1986, as amended from time to time.
D. Depreciation means, for each fiscal year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with respect to an
asset for such year or other period, except that if the Gross Asset Value of an asset differs
from its adjusted basis for federal income tax purposes at the beginning of such year of
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization or
other cost recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax depreciation,
amortization or other cost recovery deductions for such year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any reasonable
method selected by a Majority of the Partners.
E. Gross Asset Value means, with respect to any asset, the asset's adjusted basis for
federal income tax purposes, except as follows:
1. The initial Gross Asset Value of any asset contributed by a Partner to the
Limited Liability Partnership Agreement Page 1 of 17
Partnership shall be the gross fair market value of such asset, as determined by the
contributing Partner and the other General Partners;
2. The Gross Asset Values of all Partnership assets shall be adjusted to equal
their respective gross fair market values, as determined by the Partners, as of the
following times: (i) the distribution by the Partnership to a Partner of more than a
de minimis amount of Partnership Property as consideration for an interest in the
Partnership if the Partners shall reasonably determine that such adjustment is
necessary or appropriate to reflect the relative economic interests of the Partners
in the Partnership; and (ii) the liquidation of the Partnership within the meaning of
Treas. Regs. § 1.704-1(b)(2)(ii)(g);
3. The Gross Asset Value of any Partnership asset distributed to any Partner
shall be the gross fair market value of such asset on the date of distribution as
determined by the distributee Partner and the other Partners; and
4. The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets pursuant
to Code § 734(b) or Code § 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts; provided, however, that
Gross Asset Values shall not be adjusted pursuant to this paragraph to the extent
the Partners determine that an adjustment pursuant to the foregoing Paragraph is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph. The determination of the Gross
Asset Value of an asset shall take into account the premium or discount, if any, of
the liabilities associated with such asset. If the Gross Asset Value of an asset has
been determined or adjusted pursuant to the foregoing Subparagraphs B or D,
such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Profits and Losses.
F. Majority of the Partners means more than 50% of the Partners.
G. Net Cash Flow means for each fiscal year or other period, all revenues (which do
not include refundable deposits or unearned rent) of the Partnership received in cash
during such fiscal period, including Capital Contributions and the net cash proceeds from
a sale or other disposition of a Partnership asset, less the sum of (i) operating expenses of
the Partnership paid in cash during such period, (ii) the aggregate of all cash payments
during such period with respect to proper liabilities of the Partnership and payments of
interest and principal on indebtedness of the Partnership, (iii) amounts paid on account of
any loans made to the Partnership by any Partner (interest on which shall be at the rate of
one (1) percentage point over the then prevailing prime rate of (Name and Location of
Bank) , as it varies from time to time, but in no event to exceed the maximum rate
permitted by law); and (iv) such reserves, if any, as a Majority of the Partners shall agree
upon.
H. Nonrecourse Deductions has the meaning set forth in § 1.704-2(b)(1) of the
Treas.Regs. The amount of Nonrecourse Deductions for a Partnership fiscal year equals
the excess of (i) net increase, if any, in the amount of partnership minimum gain during
that fiscal year over (ii) the aggregate amount of any distributions during such fiscal year
of proceeds of a nonrecourse liability that are allocated to any increase in partnership
Limited Liability Partnership Agreement Page 2 of 17
minimum gain, determined according to the provisions of § 1.704-2(c) of the Treas.Regs.
I. Profits and Losses means, for each fiscal year or other period, an amount equal to
the Partnership's taxable income or loss for such year or period, determined in accordance
with Code § 703(a) (for this purpose, all items of income, gain, loss or deduction required
to be stated separately pursuant to Code § 703(a)(1) shall be included in taxable income
or loss), with the following adjustments:
1. Any income of the Partnership that is exempt from federal income tax and
not otherwise taken into account in computing Profits or Losses shall be added to
such taxable income or loss;
2. Any expenditures of the Partnership described in Code § 705(a)(2)(B) or
treated as Code § 705(a)(2)(B) expenditures pursuant to Treas.Regs. § 1.704-1(b)
(2)(iv)(b), and not otherwise taken into account in computing Profits or Losses
pursuant to this paragraph shall be subtracted from such taxable income or loss;
3. In the event the Gross Asset Value of any Partnership asset is adjusted, the
amount of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
4. Gain or loss resulting from any disposition of Partnership Property with
respect to which gain or loss is recognized for federal income tax purposes shall
be computed by reference to the Gross Asset Value of the Property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its Gross
Asset Value; and
5. In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other period.
II. Name. The name of the Partnership shall be XYZ, L.L.P. The
business of the Partnership, however, may be conducted under any other name selected
unanimously by the Partners.
III. Place of Business; Execution of Lease. The location of the principal place of business of
the Partnership, and the place where the records of the Partnership shall be kept, shall be
, or such other place as may from time to
(Street Address, City, County, State, Zip Code)
time be designated by a Majority of the Partners. It is agreed that the principal place of business
shall be maintained by the Partnership under a lease in the form attached hereto as Exhibit A,
and each Partner hereby authorizes and ratifies the execution by the Partnership of such lease.
IV. Purpose. The purpose for which the Partnership is organized is to render
, which shall consist of any and all work or duties within
(Describe)
the scope of , such as .
(Name of Profession) (Describe)
Such purposes may not be amended except upon unanimous approval of the Partners.
Limited Liability Partnership Agreement Page 3 of 17
V. Term. The term of the Partnership shall commence on the date hereof and shall continue
until , unless earlier terminated in accordance with this Agreement or as
(Date)
otherwise provided by law.
VI. Registration and Renewal. The Partners shall acknowledge and cause to be filed in the
Office of the Secretary of State a statement of qualification as a
(Name of State)
limited liability partnership, and annual reports as and when required by applicable law. The
Partnership shall cause the publication of the statement of qualification as required by applicable
law.
VII. Capital Contributions and Capital Accounts.
A. Capital Contributions. The Partners' Capital Contributions shall consist of:
1. An initial capital contribution of $ each due immediately
upon execution hereof, and
2. Additional Capital Contributions, not to exceed $ per
Partner in the aggregate, due upon demand therefore by a Majority of the
Partners. Any demand for additional Capital Contributions shall be made solely in
the discretion of a Majority of the Partners as and when they deem the finances of
the Partnership to require such a draw. Further, whenever such a demand is made,
an equal amount shall be demanded from each Partner.
B. Default. In the event of a default by any Partner in its contribution obligations,
the other Partners shall have the right, but not the obligation, to advance extra capital in
accordance with the provisions of Section XX hereof.
C. Capital Accounts. The Partnership shall maintain for each Partner a Capital
Account in accordance with the rules of Regulations Sections 1.704-1(b) and 1.704-2.
D. Carryover of Capital Account Upon Transfer of Partnership Interest . Upon
transfer of all or a part of an interest in the Partnership, the Capital Account of the
transferor that is attributable to the transferred interest shall carry over to the transferee
partner. Notwithstanding the preceding sentence, if the transfer of an interest in the
Partnership causes a termination of the Partnership under § 708(b)(1)(B) of the Code, the
Capital Account that carries over to the transferee partner will be adjusted in accordance
with Paragraph (b)(2)(iv)(e) of Treas.Regs. § 1.704-1 in connection with the constructive
liquidation of the Partnership under Paragraph (b)(1)(iv) of Treas.Regs. § 1.708-1. The
constructive reformation of the Partnership shall, for purposes of this Section 7 only, be
treated as the formation of a new partnership, and the Capital Accounts of the Partners
will be determined and maintained accordingly.
VIII. Rights, Powers and Liabilities of the Partners.
A. Management of Partnership Day-to-Day Business. The day-to-day business of
the Partnership shall be administered at the direction from time to time of a Majority of
Limited Liability Partnership Agreement Page 4 of 17
the Partners. A Majority of the Partners may effect such administration in any manner
deemed appropriate by them in their sole discretion, including, without limitation, the
appointment of a Partner as Managing Partner with or without established guidelines for
authority and action.
B. Extraordinary Partnership Decisions. All Partnership decisions involving
matters other than the day-to-day business of the Partnership, including, without
limitation, decisions involving or relating to:
1. The sale, lease or other disposition of any property of the Partnership
having a value in excess of $5,000;
2. The purchase or contract to purchase, by the Partnership, of any real
property, or any asset or service with a cost to the Partnership in excess of $5,000;
3. The settlement, release or compromise of any claims or debts of or in
favor of the Partnership;
4. Any transaction with an affiliate of any Partner;
5. The admission of a new Partner to the Partnership (provided that any new
Partner admitted under this subparagraph shall execute a counterpart of this
Partnership Agreement and shall agree to be bound by all of the terms and
provisions hereof to the same extent as if he or she were an original signatory
hereto, except that such new Partner shall have no liability with respect to
Partnership liabilities arising prior to such new Partner's admission to the
Partnership);
6. Dissolution of the Partnership prior to its stated term; or
7. Any other transaction in connection with which it is anticipated that the
Partnership will expend in excess of $5,000, shall, unless a specific provision of
this Agreement (such as Section X below or Section IV above) requires
unanimous approval, be made only by the written consent of greater than 75% of
the Partners, which consent a Partner may give or withhold in each Partner's sole
and absolute discretion. Such consent may be obtained with or without a meeting
of all of the Partners.
C. Nonwaiver. Except as expressly set forth in this Paragraph VIII, nothing
contained herein shall be construed to limit or modify the duty of care, duty of loyalty or
obligations of good faith and fair dealing of any partner, provided that:
1. The following categories of activities shall not be construed as a violation
of any partner's duty of loyalty: ;
(Describe)
2. The following shall prescribe the standard by which the performance of
the Partners' duty of care is to be measured: ;
(Describe)
and
3. The following shall prescribe the standards by which the performance by
the partners of the obligations of good faith and fair dealing are to be measured:
Limited Liability Partnership Agreement Page 5 of 17
.
(Describe)
IX. Full Time Service; Competing Activities. Each Partner shall devote all of his or her
professional time to the business of the Partnership and shall engage in no competing activity
without the written consent of all other Partners. It is agreed that any activity involving
or commercial activity substantially related to
(Describe) (Describe)
shall be deemed to be a competing activity. Moreover, it is acknowledged that the pursuit by any
Partner of business activities that compete with the business of any client of the Partnership is
potentially disadvantageous to the Partnership, and therefore prior to engaging in any such
activities, a Partner shall submit a written proposal to the Partnership describing in detail the
contemplated activities and shall not pursue such activities without the consent of a Majority of
the Partners.
X. Decisions Requiring Unanimous Approval. Notwithstanding any other provision
hereof, a decision on any of the following matters shall require the unanimous approval of all of
the Partners, which approval a Partner may give or withhold in such Partner's sole and absolute
discretion:
A. Amendments of this Agreement, including any amendment to admit a new
partner;
B. Any sale or other disposition of substantially all of the assets of the Partnership or
disposition of the goodwill of the Partnership's business;
C. Borrowings by the Partnership in excess of $15,000 in the aggregate;
D. Any assignment of the property of the Partnership in trust for creditors or on the
assignee's promise to pay the debts of the Partnership;
E. Any act which would make it impossible to carry on the ordinary business of the
Partnership; or
F. Any confession of a judgment or submission of a Partnership claim or liability to
arbitration or reference.
XI. Income, Gain, Losses and Distributions. All Partnership income, loss, gain and credits
for each fiscal year shall be allocated to the Partners in accordance with their Participation
Percentage as established by the Partnership not later than ninety days following the end of the
year in question. The total Participation Percentages shall equal 100%; each Partner shall be
assigned a Participation Percentage based on such Partner's contribution to the Partnership for
the year in question. The evaluation of each Partner's contribution shall take into consideration,
among other things, such Partner's billings and collections for the year in question, the total
billed to and collected from clients whose accounts are managed by such Partner, such Partners
administrative contribution to the Partnership, and such Partner's years of service to the
Partnership. Participation Percentages shall be established by a Majority of the Partners at a
meeting held for that purpose. Notwithstanding any other provision hereof, in the absence of
willful disregard of Partnership obligations, no Partner shall be assigned a Participation
Percentage which, when applied to Partnership income for the year in question would yield
Limited Liability Partnership Agreement Page 6 of 17
income to such Partner in an amount less than such Partner's Minimum Income Share. Each
Partner's Minimum Income Share shall be an amount equal to (a) 75% of (b) such Partner's
income for the previous year multiplied by a fraction, the numerator of which is the Partnership's
Net Income Per Partner for the year in question and the denominator of which is the
Partnership's Net Income Per Partner for the previous year. Net Income Per Partner shall be
the Partnership's adjusted income for federal income tax purposes divided by the number of
Partners for the year in question (provided that if Partners have been admitted to or left the firm
during the year in question, the total number of Partners shall be adjusted appropriately to yield
a full time equivalency) . All distributions by the Partnership shall be made pro rata to the
Partners in accordance with Participation Percentages for the year(s) in question.
XII. Books, Records, Accounting, Reports and Certain Tax Matters.
A. Fiscal Year . The fiscal year of the Partnership shall be the calendar year.
B. Books of Account. The Partnership shall keep proper and complete books of
account adequate for its purposes. The books of account shall be maintained at its
principal place of business and shall be open to inspection and copying by any of the
Partners or by their authorized representatives at any reasonable time during business
hours. Balance sheets and income reports, audited if requested by any Partner, as well as
state and federal income tax returns, shall be prepared at Partnership expense at the end
of each fiscal year by or such other public
(Name of Accounting Firm)
accounting firm as hereafter selected by a Majority of the Partners.
C. Basis of Accounting. The Partnership books shall be kept on a cash basis.
D. Bank Accounts. All funds of the Partnership are to be deposited in the
Partnership's name in such bank account or money market account or accounts as may be
designated by a Majority of the Partners and may be withdrawn for authorized
Partnership purposes on the signature of any Partner and such other person or persons as
a Majority of the Partners may authorize.
E. Annual Reports. Within seventy-five (75) days after the close of the
Partnership's fiscal year, the Partnership shall prepare and mail to each Partner a copy of
the Internal Revenue Service Form K-1 as attached to the federal partnership tax return to
be filed for the Partnership. Upon request by a Partner, the Partnership will provide such
Partner, within ninety (90) days following the end of any fiscal year, a written report
setting forth the following:
1. The assets and liabilities of the Partnership;
2. The net income or net loss of the Partnership;
3. Such Partner's Capital Account and the manner of its calculation; and
4. Any other information necessary to enable such Partner to prepare the
Partner's individual income tax returns.
F. Meetings. Meetings of the Partners shall be scheduled for mutually convenient
times, and each Partner shall have at least twenty-four (24) hours notice of any meeting.
Meetings may be called by any Partner. At any meeting, a quorum shall exist only if all
Limited Liability Partnership Agreement Page 7 of 17
Partners are in attendance, either in person or by phone or by written proxy (including a
facsimile transmitted proxy) given to a Partner in attendance.
G. Written Minutes . Written minutes of the business transacted at Partnership
meetings (if any) shall be made and retained at the Partnership office only if requested by
any Partner.
H. Tax Matters Partner . is hereby appointed
(Name of Partner)
as the tax matters partner of the Partnership within the meaning of § 6231(a)(7) of the
Code.
XIII. Dealing With Affiliates; Business Opportunities. The Partnership shall not enter into
any agreements or transactions with, and shall make no payments to, Affiliates of any of the
Partners except as otherwise unanimously agreed by the Partners. It is acknowledged that from
time to time Partners shall have presented to them, by clients or by third parties, opportunities for
investment or active participation in outside business activities. It is further acknowledged that
all such opportunities shall initially constitute assets of the Partnership. When presented with any
such opportunity, a Partner shall notify the Partnership thereof in writing, and shall include in
such notification a recommendation as to whether the Partnership should pursue such
opportunity. If the Partnership elects not to pursue the opportunity, the Partner to whom it was
presented shall be free to pursue it, subject to the obligations of such Partner hereunder with
respect to, among other things, the devotion of substantially all of his or her professional time to
the business of the Partnership.
XIV. Transfer of Interests. Except with the prior written consent of all other Partners, no
Partner shall sell, assign, convey, hypothecate, encumber or otherwise create in any other party
an interest in such Partner's interest in the Partnership, and any attempt to do so shall be void.
XV. Retirement, Withdrawal, Death, Disability, or Bankruptcy of a Partner .
A. Retirement. Each Partner shall be entitled to retire upon reaching the age of 55,
and shall be required to retire (unless otherwise agreed in writing by all other Partners)
upon reaching age 65. Upon retirement, such Partner's interest in the Partnership shall be
redeemed for an amount equal to his or her then-current Capital Account, which amount
shall be paid, with interest at 10% per annum, in 120 equal monthly installments.
B. Withdrawal. Any Partner shall have the right to withdraw from the Partnership at
any time. If a Partner elects to withdraw prior to age 55, such Partner's interest in the
Partnership shall be redeemed for an amount equal to his or her then-current Capital
Account, which shall be paid, without interest, as follows: one-half of such balance shall
be paid in 60 equal monthly installments; the remaining one-half shall be payable on the
fifth anniversary of the date of withdrawal. If a Partner withdraws after age 55, such
Partner shall be treated as having retired. Notwithstanding any other provision hereof, a
Partner shall be deemed to have withdrawn from the Partnership upon revocation or
suspension of his or her license to practice or the taking
(Name of Profession)
of other major disciplinary action against him/her as a
(Name of Profession)
Limited Liability Partnership Agreement Page 8 of 17
by any governmental or professional authority.
C. Death. Upon the death of a Partner, such Partner's interest in the Partnership shall
be redeemed for an amount equal to such Partner's then-current capital account, payable
in twenty-four equal monthly installments, with interest at 10% per annum.
D. Disability. If a Partner becomes partially disabled [i.e., if as a result of injury or
illness he or she is unable to engage in the full time practice of
(Name of Profession)
but is still able to engage in such practice on at least a part-time basis) , such Partner
shall not be required to withdraw from the Partnership, but instead such Partner's interest
in Partnership income and loss shall be appropriately adjusted to reflect such Partner's
reduced contribution to the Partnership. If a Partner becomes totally disabled (which
disability shall be determined by an independent treating physician to prevent the Partner
from engaging in the practice of accounting for a period of at least three years) such
Partner shall be deemed to have retired from the Partnership on the date of disability, and
shall be entitled to payment hereunder for his or her interest in the Partnership as if such
retirement had occurred at age 55 or later; provided, however, that if a Partner becomes
disabled prior to age 55 and within five years from the date of such disability such
Partner shall commence the practice of accounting other than with the Partnership, such
payments shall be adjusted so that such Partner shall receive no greater amount than
would have been payable had such Partner withdrawn from the Partnership prior to age
55.
XVI. Dissociation and Dissolution
A. Events of Dissociation. A dissociation shall occur upon the occurrence of any
event that results in a dissociation with respect to a partner in a partnership at will under
, or any successor thereto.
(cite state statute)
B. Effect of Dissociation. I f a partner's dissociation does not result in a dissolution
under Section XVI(C) hereof, then the dissociation shall have the effect set forth in
, or any successor thereto, and the
(cite state statute)
dissociated partner's interest shall be purchased pursuant to ,
(cite state statute)
or any successor thereto.
C. Dissolution . The Partnership shall be dissolved:
1. Upon the sale or other disposition of all the assets to which the Partnership
has any right, title and interest, and the distribution to the Partners of the cash or
cash equivalent proceeds from such sale or other disposition, provided that the
Partners acknowledge and agree that upon the sale of substantially all of the
Partnership's assets in connection with which the Partnership receives an
installment receivable, no such dissolution shall occur until such receivable is
paid in full;
2. Upon an order of dissolution by a court of competent jurisdiction or upon
any recognized process of dissolution as provided by the laws of the State of
Limited Liability Partnership Agreement Page 9 of 17
;
(Name of State)
3. Upon the occurrence of any event that results in the dissolution of a
partnership at will under , or any
(citation of state statute)
successor thereto;
4. Upon any partner becoming dissociated by death or for any of the reasons
set forth in , or by wrongful dissociation under
(citation of state statute)
, unless within 90 days of any such dissociation, a
(citation of state statute)
majority of the remaining partners vote to not wind up the Partnership;
5. Upon all of the partners voting to wind up the business of the Partnership;
6. Upon any partner electing to wind up the Partnership after expiration of
the term set forth herein; or
7. Upon the occurrence of any event specified in .
(citation of state statute)
XVII. Distribution Upon Liquidation. Upon dissolution of the Partnership pursuant to Section
XVI above and unless, pursuant to Section XVI(C) above, the Partnership is not to be
liquidated, the Partnership shall be liquidated. Upon liquidation of the Partnership, the assets of
the Partnership shall be disposed of pursuant to Section XVIII below and the proceeds employed
as follows:
A. To liquidate all debts, liabilities and obligations of the Partnership (including
debts owed to Partners) and to establish such reserves as a Majority of the Partners deems
necessary for the payment of future, contingent or unforeseen liabilities and obligations
of the Partnership. If there is a deficit balance in any Partner's capital account upon
liquidation of such debts, liabilities and obligations, as determined after taking into
account all Capital Account adjustments for the Partnership taxable year during which
such liquidation occurs (other than those made pursuant to this Section XVII ), such
Partner shall contribute cash to the Partnership in an amount sufficient to restore such
Partner's Capital Account to zero. Such cash contribution shall be made (but in all events
prior to the end of the Partnership taxable year in which such liquidation occurred),
provided that at the election of a Majority of the Partners (excluding, for purposes of the
calculation thereof, the Partner to whom such distribution is to be made) the amount of
such distribution may be reduced by the amount to be contributed to restore such
Partner's Capital Account to zero, whereupon the full distribution and contribution shall
be deemed made. The cash so contributed shall be paid to creditors of the Partnership to
the extent necessary to discharge all debts, liabilities and obligations of the Partnership;
and then
B. To distribute the remaining assets or proceeds from the sale thereof to the Partners
in proportion to their Capital Account balances, to the extent of any positive balances in
such Capital Accounts, as determined after taking into account all Capital Account
adjustments for the Partnership taxable year during which such liquidation occurs (other
Limited Liability Partnership Agreement Page 10 of 17
than those made pursuant to this Section XVII ) (subject, however, to the provisions in
Section XX hereof). If there is a deficit balance in any Partner's Capital Account
following such distribution, such Partner shall contribute cash to the Partnership in an
amount sufficient to restore such Partner's Capital Account to zero. Such cash
contribution shall be made within ninety (90) days after the date of such liquidation (but
in all events prior to the end of the Partnership taxable year in which such liquidation
occurred), provided that at the election of a Majority of the Partners (excluding, for
purposes of the calculation thereof, the Partner to whom such distribution is to be made)
the amount of such distribution may be reduced by the amount to be contributed to
restore such Partner's Capital Account to zero, whereupon the full distribution and
contribution shall be deemed made. The cash so received by the Partnership shall be
distributed to the other Partners in proportion to the positive balances, if any, in their
Capital Accounts. During the period of liquidation, the Partnership shall continue to
allocate realized income and losses, including those from the disposition of the
Partnership properties, in the same manner as before dissolution.
XVIII. Procedures on Liquidation of the Partnership or a Partner's Interest Therein.
Promptly following any liquidation of the Partnership, all Partnership receivables and payables
shall be liquidated, cash reserves shall be established as agreed by a Majority of the Partners for
the payment of unliquidated liabilities, and the Partnership property shall be sold as promptly as
possible as is consistent with obtaining the fair value thereof. As soon as practicable thereafter,
the then-remaining assets of the Partnership shall be distributed pursuant to Section XVII above.
The Partnership shall then be terminated, subject only to the execution and filing of any and all
necessary instruments required to complete the dissolution, winding up and termination in
accordance with the laws of the State of . Notwithstanding any
(Name of State)
other provision in this Agreement to the contrary, upon liquidation of any Partner's interest in the
Partnership (as defined in Paragraph (b)(2)(ii)(g) of Treas.Regs. § 1.704-1), the liquidating
distribution made by the Partnership to such Partner shall be made in accordance with, and shall
be equal to, the amount of the positive balance in such Partner's Capital Account, determined
after taking into account all Capital Account adjustments for the Partnership taxable year during
which such liquidation occurs (other than those made pursuant to this Section XVIII ) by the end
of such taxable year (or, at the Partnership's election, within 90 days after the date of such
liquidation) .
XIX. Organizational Expenses. All organizational expenses of every kind incurred by the
Partnership in connection with the formation of the Partnership (including legal and other
expenses but excluding expenses incurred in connection with the formation of any Partner) shall
be paid by the Partnership.
XX. Defaulting Partners.
A. Default in Capital Contributions . A defaulting Partner is one who has defaulted
in the payment of a Capital Contribution due under the terms of this Agreement and shall
be considered as such until the default of such Partner is cured. A Partner shall be
considered to have cured the Partner's default only at such time as the Partner has paid to
the Partnership the full amount of the Partner's Capital Contributions in default and has
Limited Liability Partnership Agreement Page 11 of 17
paid to all Partners which have advanced extra capital with respect to such default all
interest accrued thereon under Section XXII(D) hereof. While in default, a Partner shall
have no voice or vote whatsoever in the management of the affairs of the Partnership.
B. Right to Advance Extra Capital . In the event any Partner shall fail to advance
capital required to be advanced to the Partnership pursuant to the provisions of this
Agreement, any or all of the non-defaulting Partner(s) shall have the right (but not the
obligation) to advance the capital required to be advanced by the defaulting Partner, pro
rata in accordance with the then balances in their Capital Accounts if more than one non-
defaulting Partner wishes to make such advances. The sums so advanced to the capital of
the Partnership are hereinafter referred to as extra capital. The Partner(s) making such
advances shall have certain rights against the defaulting Partner as provided below.
C. Extra Drawing Account. A separate drawing account shall be maintained by the
Partnership for each Partner which has advanced extra capital, which account shall reflect
extra capital advanced by such Partner, the respective date the extra capital is advanced,
the date extra capital is withdrawn or otherwise debited to the account, and the identity of
the Partner failing to advance the required Capital Contributions. The extra drawing
account of any Partner shall not be reduced, changed or affected, except as set forth in
Section XXII(E) hereof, it being intended that the extra drawing account be kept separate
and distinguished from the Capital Account of the Partner maintained in accordance with
the provisions of Section VII above.
D. Return on Account of Extra Capital. A defaulting Partner shall pay interest on a
quarterly basis to any Partner which has advanced extra capital on behalf of the
defaulting Partner from the date of the advance until repaid at the higher annual rate from
time to time of eighteen percent (18%) per annum or the prime rate of interest charged by
, plus four (4) percentage points, said
(Name of Bank and Location)
prime rate to be determined monthly based on the prime rate charged by said bank on the
first business day of each month. To the extent the interest is not paid, the distributions to
which the defaulting Partner is otherwise entitled under this Agreement shall be paid over
to the Partner(s) advancing extra capital on behalf of said defaulting Partner and shall be
treated by such non-defaulting Partner(s) as interest income. The defaulting Partner shall
treat such payment as interest expense and hereby irrevocably appoints the Managing
Partner as the Partner's agent to make such payment. Amounts so distributed to such non-
defaulting Partner(s) under this Subsection (D) shall be deducted from the Capital
Account of the defaulting Partner as a distribution to such defaulting Partner.
E. Extra Capital Distributions. Upon the cure by a defaulting Partner of the
Partner's default hereunder, the Capital Contribution made by such defaulting Partner to
effect such cure shall be credited to the Partner's Capital Account and shall immediately
be distributed to, and charged to the Capital Accounts of, the non-defaulting Partners who
advanced extra capital to cure such default, in the same ratio as such non-defaulting
Partners advanced such extra capital. Any distributions to which a defaulting Partner is
entitled under this Agreement shall, after any payment thereof to the non-defaulting
Partner(s) under Subsection (D) above, automatically be advanced to the capital of the
Partnership to the extent the defaulting Partner is in arrears of amounts required of that
Partner. The Partner(s) which advanced extra capital shall thereupon be entitled, at their
Limited Liability Partnership Agreement Page 12 of 17
request to receive distributions of such extra capital in the same ratio as the extra capital
was advanced by the non-defaulting Partner(s). In the event the extra capital available for
withdrawal is not withdrawn as aforesaid, the extra capital account of the Partners
entitled to withdraw the same shall continue to be reflected on the Partnership's books
and records and shall remain available for distribution to such Partners upon their request.
Such extra capital account shall not bear interest. When distributed, such extra capital
shall be charged to the Capital Accounts of the non-defaulting Partners receiving such
distribution.
F. Termination of a Defaulting Partner's Interest. So long as any Partner shall be
in default under the provisions of this Agreement, the non-defaulting Partner(s) may elect
to pursue any of the options described below against the defaulting Partner:
1. In the event a defaulting Partner fails, within seven (7) days after receipt
of written notice stating that said Partner is in default, to cure said default in full,
any non-defaulting Partner(s) may, after five (5) days written notice given to the
defaulting Partner and before said default is cured in full, (A) expel the defaulting
Partner from the Partnership; (B) bring suit against the defaulting Partner for the
amount in default, together with interest thereon from the day such amount was
due at the prime rate of interest charged by
(Name of Bank)
, as it varies from time to time, plus four (4)
(Location of the Bank)
percentage points, and collection expenses, including, without limitation, the fees
and disbursements of counsel for the Partnership; and/or (C) pursue any other
remedy or course of action which the non-defaulting Partners deem to be
appropriate.
2. If a Partner is expelled, such expulsion shall be effective without further
notice and shall be retroactive to the date the payment was due. A Partner who
files a petition in bankruptcy may forthwith be expelled from the Partnership
without prior notice or the necessity of any further action by the Partners. Upon
the expulsion of any Partner, said Partner shall not have any right to vote or to
participate in or receive any net income, net losses, distributions, credits or
deductions of the Partnership, commencing with the fiscal year in which such
expulsion occurs and thereafter for the term of the Partnership. Notwithstanding
any other provision hereof (including the provisions relating to withdrawal from
the Partnership) an expelled Partner shall be entitled to the return of its Capital
Account in the Partnership, only upon liquidation of the Partnership and after all
of the other Partners have received a full distribution of the amount in their
Capital Accounts. The rights of an expelled Partner to the return of its Capital
Account shall be junior in all respects to those of the remaining Partners.
G. Upon expulsion, the defaulting Partner's interest in the net income and losses of
the Partnership shall automatically be reallocated to the non-defaulting Partners in
proportion to the balances of their extra capital accounts on the date of expulsion.
H. From and upon the effective date of any expulsion of a Partner hereunder, the
Partner(s) who delivered the written notice bringing about such expulsion shall be
Limited Liability Partnership Agreement Page 13 of 17
obligated to make all future Capital Contributions which the expelled Partner would have
been obligated to make (provided that such Capital Contributions shall be made pro rata
in accordance with the Current Capital Contributions of the Partners so obligated), and
such Partner(s) shall be entitled (pro rata in accordance with their Capital Contributions
made pursuant to this subsection) to receive all distributions of cash and allocations of
income, gain, deduction and loss which the expelled Partner would have been entitled to
receive with respect to the Capital Contributions made under this subsection had the
expelled Partner not been expelled and had such expelled Partner made such Capital
Contributions.
I. No Waiver. Failure of the non-defaulting Partners to promptly exercise any of the
rights granted herein for any one default shall not be deemed a waiver of such rights as to
such default or any subsequent defaults.
XXI. Employment of the Partners . Each Partner shall be an employee of the Partnership, and
with respect to such employment, it is agreed as follows:
A. Salary. No Partner shall receive a salary from the Partnership. Each Partner's
compensation shall be limited to his or her share of the income of the Partnership. Each
Partnership shall receive a twice-monthly draw of $ as an advance against
such Partner's share of income for the then-current year. To the extent such draws exceed
a Partner's share of income, the excess shall be a charge against such Partner's share of
income for the following year.
B. Benefits . The Partnership may from time to time establish various employee
benefits, all of which shall apply equally to the Partners. The Partnership shall maintain
professional liability insurance in limits of coverage not less than $ which
shall name each Partner as an additional insured. In the event of any professional liability
claim in excess of available insurance coverage, the Partner whose actions gave rise to
such claim shall be liable to the Partnership for the full amount of such excess.
C. Vacation. Each Partner shall be entitled to of vacation per year.
(Number of days)
D. Facilities and Support. Each Partner shall be supplied by the Partnership at its
expense with reasonable facilities necessary for the effective practice of public
accounting, including office facilities, computer and other equipment, access to library
and support personnel.
E. Professional Matters. Each Partner shall maintain his or her license to practice
public accounting in the State of in good standing and shall
(Name of State)
take all actions necessary to ensure that such Partner's professional stature [including
status as a , which shall be required of all Partners,
(Name of Profession)
licensure and any certification or other statement of qualification by a professional
organization] is not impaired. Each Partner shall be entitled to reimbursement from the
Partnership for any reasonable expenses incurred in discharging his or her obligations
under this Paragraph.
F. Automobile. The Partnership shall provide to each Partner an automobile for such
Limited Liability Partnership Agreement Page 14 of 17
Partner's business and personal use. Each Partner shall be obligated to maintain
appropriate automobile insurance, including liability insurance, and shall be obligated to
pay the expenses of operating such automobile, including repair expenses.
G. Competition. It is acknowledged that the Partnership will provide to each Partner
significant training and will entrust to each Partner significant proprietary information
and confidential information regarding its clientele. The Partnership will be irreparably
harmed by any Partner who uses such information or benefits from such training in
competition with the Partnership within a period of six (6) months after such Partner's
withdrawal, resignation or expulsion from the Partnership. Therefore, each Partner
covenants and agrees that during his or her time as a Partner and for a period of six
months after the termination of his or her time as a Partner for any reason, he or she will
not engage in the practice of public accounting anywhere in the State of
. In the event of any breach or threatened breach of the
(Name of State)
foregoing covenant, the Partnership shall have the following remedies, in addition to all
other remedies available at law or in equity:
1. The Partnership shall have the right to seek an injunction from any court
of competent jurisdiction;
2. The Partnership shall have the right to contact all potential clients of the
breaching (or threatened to be breaching) Partner and inform such clients of the
foregoing covenant and any liability they might have associated with the breach
thereof; and
3. The Partnership shall have the right to recover from the breaching party an
amount equal to 50% of the gross billings of the breaching Partner generated
during the period of his or her breach of the foregoing covenant. Notwithstanding
any other provision hereof, if a court should conclude that the foregoing covenant
is unenforceable either because of excessive geographic scope or duration, the
following shall apply: (i) with respect to geographic scope, such covenant shall be
deemed to be a severable covenant with respect to each county of the State of
, and such covenant shall be reduced in scope by
(Name of State)
deleting one county at a time (starting with the least populous county and
proceeding in inverse order of population) until the covenant is of the greatest
permissible geographic scope; and (ii) with respect to duration, such covenant
shall be deemed to be a severable covenant with respect to each of the 26 weeks
following a Partner's withdrawal, resignation or expulsion, and such covenant
shall be reduced in scope by deleting one week at a time until the covenant is of
the maximum permissible duration.
XXII. Miscellaneous.
A. The invalidity of any portion of this Agreement will not and shall not be deemed
to affect the validity of any other provision. If any provision of this Agreement is held to
be invalid, the parties agree that the remaining provisions shall be deemed to be in full
force and effect as if they had been executed by both parties subsequent to the
Limited Liability Partnership Agreement Page 15 of 17
expungement of the invalid provision.
B. The failure of either party to this Agreement to insist upon the performance of any
of the terms and conditions of this Agreement, or the waiver of any breach of any of the
terms and conditions of this Agreement, shall not be construed as subsequently waiving
any such terms and conditions, but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred.
C. This Agreement shall be governed by, construed, and enforced in accordance with
the laws of the State of .
(Name of State)
D. Unless provided herein to the contrary, any notice provided for or concerning this
Agreement shall be in writing and shall be deemed sufficiently given when sent by
certified or registered mail if sent to the respective address of each party as set forth at the
beginning of this Agreement.
E. In the event that any lawsuit is filed in relation to this Agreement, the
unsuccessful party in the action shall pay to the successful party, in addition to all the
sums that either party may be called on to pay, a reasonable sum for the successful party's
attorney fees.
F. Notwithstanding the foregoing, and anything herein to the contrary, any dispute
under this Agreement shall be required to be resolved by binding arbitration of the parties
hereto. If the parties cannot agree on an arbitrator, each party shall select one arbitrator
and both arbitrators shall then select a third. The third arbitrator so selected shall arbitrate
said dispute. The arbitration shall be governed by the rules of the American Arbitration
Association then in force and effect.
XXIII. This Agreement shall constitute the entire agreement between the parties and any prior
understanding or representation of any kind preceding the date of this Agreement shall not be
binding upon either party except to the extent incorporated in this Agreement.
XXIV. Any modification of this Agreement or additional obligation assumed by either party in
connection with this Agreement shall be binding only if placed in writing and signed by each
party or an authorized representative of each party.
XXV. This Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute but one and the same
instrument.
XXVI. In performing under this Agreement, all applicable governmental laws, regulations,
orders, and other rules of duly-constituted authority will be followed and complied with in all
respects by both parties.
XXVII. Incorporation of Documents and Exhibits . All exhibits referred to herein are by this
reference made a part hereof as though fully set forth herein.
///
///
Limited Liability Partnership Agreement Page 16 of 17
Witness our signatures this the day of , 20 .
John Doe , Partner Mary Smith , Partner
(Type/Print Name) (Type/Print Name)
John Roe , Partner
(Type/Print Name)
Limited Liability Partnership Agreement Page 17 of 17
