Law Practice
Apr. 17, 2015
The tax when partners withdraw
Know exactly what your new firm's partnership agreement provides before you leave a firm that treats its partners fairly. It could be the best lateral move you never made. Edwin B. Reeser
The method for truing up the distributions made to a withdrawing partner and the obligation to repay over-distributions create a narrow window for partners to minimize "departure tax" - that is, the financial penalty applied to partners who voluntarily withdraw, which can be a rude awakening for partners who didn't read the partnership agreement.
Here's a generic provision found in partnership agreements regarding vo...
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