I am faced with paying a partner for a full withdrawal and wonder how others interpret our partnership agreement. We haven't faced a full withdrawal that is done in cash before so it's new territory for us. The agreement we use states:
..when payment is made in cash, equal to ninety-seven per cent of his capital account or his capital account less actual cost of selling sufficient securities to obtain the cash to meet the withdrawal, whichever is the lesser amount.
The 3% relates back to a time when that's what brokers charge for transactions. We amended our agreement to include:
Each calendar year a partner may make one cash withdrawal with a fee of 0.5%.
The partnership has enough cash on hand to pay this partner. In a full withdrawal the remaining partners decide the form of the withdrawal.
Any thoughts would be appreciated.
Scott
Bernard Worst on
Our club payout in cash or securities, our choice, less a $50 flat fee. Account is valued at the following meeting after the meeting at which the withdrawal is formalised. Payout is no later then 30 days hence.
Bernard Worst
bworst@yahoo.com
From: club_cafe@bivio.com <club_cafe@bivio.com> on behalf of SB via bivio.com <user*1595500001@bivio.com> Sent: Thursday, September 22, 2022 8:14:21 AM To: club_cafe@bivio.com <club_cafe@bivio.com> Subject: [club_cafe] Paying a withdrawing partner
I am faced with paying a partner for a full withdrawal and wonder how others interpret our partnership agreement. We haven't faced a full withdrawal that is done in cash before so it's new territory for us. The agreement we use states:
..when payment is made in cash, equal to ninety-seven per cent of his capital account or his capital account less actual cost of selling sufficient securities to obtain the cash to meet the withdrawal, whichever is the lesser amount.
The 3% relates back to a time when that's what brokers charge for transactions. We amended our agreement to include:
Each calendar year a partner may make one cash withdrawal with a fee of 0.5%.
The partnership has enough cash on hand to pay this partner. In a full withdrawal the remaining partners decide the form of the withdrawal.
Any thoughts would be appreciated.
Scott
Peter Dunkelberger on
Seems to me that you have a conflict in your partnership agreement. If I were a partner in your club, I could do a one time withdrawal and get 99.5% of my (presumably) market value at the time. Whereas if I did a full withdrawal I would get only 97% of my market value. So I would do my one transaction per year option, and then I would make no more contributions and then resign the following year. It means I saved 2.5% of my market value. Perhaps you have something in your agreement that prevents this from happening, but I don't see it.
We have a prohibition on partial withdrawals. You die or resign, and get transaction fees deducted from your withdrawal, done in stock or cash. Your valuation date is the date of notice the club receives your resignation or date of death. We have 60 days to pay after your valuation date.
I am faced with paying a partner for a full withdrawal and wonder how others interpret our partnership agreement. We haven't faced a full withdrawal that is done in cash before so it's new territory for us. The agreement we use states:
..when payment is made in cash, equal to ninety-seven per cent of his capital account or his capital account less actual cost of selling sufficient securities to obtain the cash to meet the withdrawal, whichever is the lesser amount.
The 3% relates back to a time when that's what brokers charge for transactions. We amended our agreement to include:
Each calendar year a partner may make one cash withdrawal with a fee of 0.5%.
The partnership has enough cash on hand to pay this partner. In a full withdrawal the remaining partners decide the form of the withdrawal.
Any thoughts would be appreciated.
Scott
Bernard Worst on
Your agreement indicates 3% or actual fees which ever is less.
If cash on hand covers there would be no brokerage fee, no deduction for the withdrawing partner.
Bernard Worst
bworst@yahoo.com
From: club_cafe@bivio.com <club_cafe@bivio.com> on behalf of Scott Freeman via bivio.com <user*1595500001@bivio.com> Sent: Thursday, September 22, 2022 9:14:15 AM To: bworst@yahoo.com <bworst@yahoo.com> Subject: Re: Paying a withdrawing partner
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
Carole Jansen on
Hopefully, your agreement states what the .5% is based on (amount of the withdrawal or full value of the partnership portfolio?) and states a valuation date and deadline for payment of the withdrawal.
With that information, you should have all you need to fill out Bivo's withdrawal request form, which will calculate the amount of the withdrawal, and then pay the partner.
I am faced with paying a partner for a full withdrawal and wonder how others interpret our partnership agreement. We haven't faced a full withdrawal that is done in cash before so it's new territory for us. The agreement we use states:
..when payment is made in cash, equal to ninety-seven per cent of his capital account or his capital account less actual cost of selling sufficient securities to obtain the cash to meet the withdrawal, whichever is the lesser amount.
The 3% relates back to a time when that's what brokers charge for transactions. We amended our agreement to include:
Each calendar year a partner may make one cash withdrawal with a fee of 0.5%.
The partnership has enough cash on hand to pay this partner. In a full withdrawal the remaining partners decide the form of the withdrawal.
Any thoughts would be appreciated.
Scott
ira smilovitz on
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
John Rice on
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
John Munn on
The way I would interpret it is: If no other withdrawals were made in this calendar year then I would allow a full withdrawal in cash for 99.5% of the partner's account. If the partnership wanted to hold to the full withdrawal option to determine how to make payment, the withdrawing partner could get pissy and take all but a buck this year, remain in the partnership until the first quarter of 2023, and essentially force a cash withdrawal anyway. Then the partner would remain on the books next year. You have the cash, just pay your partner out in cash at the 99.5% level and be done with it. I'd also move to eliminate the withdrawal charges that exceed actual costs in your agreement.
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
Dan Cohn on
When someone resigns or passes away we give the remaining members the opportunity to purchase the shares so we do not have to sell anything and no costs so the check is 100% of the balance. Balance date is determined by the amount of dues this member has paid in ($100 month dues).
Yes we do have a maximum that a member can have up to 10% of the value.
Sent from my iPhone
On Sep 22, 2022, at 10:41 AM, John Munn via bivio.com <user*223700001@bivio.com> wrote:
The way I would interpret it is: If no other withdrawals were made in this calendar year then I would allow a full withdrawal in cash for 99.5% of the partner's account. If the partnership wanted to hold to the full withdrawal option to determine how to make payment, the withdrawing partner could get pissy and take all but a buck this year, remain in the partnership until the first quarter of 2023, and essentially force a cash withdrawal anyway. Then the partner would remain on the books next year. You have the cash, just pay your partner out in cash at the 99.5% level and be done with it. I'd also move to eliminate the withdrawal charges that exceed actual costs in your agreement.
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
Sheryl Story on
I seem to recall a reason to limit partial withdrawals to the amount actually contributed (not the profits/unrealized gain)...something to do with taxes???
Sent from my iPhone
Sheryl Story
On Sep 22, 2022, at 11:03 AM, Dan Cohn via bivio.com <user*32501700001@bivio.com> wrote:
When someone resigns or passes away we give the remaining members the opportunity to purchase the shares so we do not have to sell anything and no costs so the check is 100% of the balance. Balance date is determined by the amount of dues this member has paid in ($100 month dues).
Yes we do have a maximum that a member can have up to 10% of the value.
Sent from my iPhone
On Sep 22, 2022, at 10:41 AM, John Munn via bivio.com <user*223700001@bivio.com> wrote:

The way I would interpret it is: If no other withdrawals were made in this calendar year then I would allow a full withdrawal in cash for 99.5% of the partner's account. If the partnership wanted to hold to the full withdrawal option to determine how to make payment, the withdrawing partner could get pissy and take all but a buck this year, remain in the partnership until the first quarter of 2023, and essentially force a cash withdrawal anyway. Then the partner would remain on the books next year. You have the cash, just pay your partner out in cash at the 99.5% level and be done with it. I'd also move to eliminate the withdrawal charges that exceed actual costs in your agreement.
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
Peter Dunkelberger on
One does have to be careful about following the details in the partnership agreement. If you treat one partner differently from another, and the "another" objects, your partnership could be in a world of hurt. I don't believe that the club under discussion provided enough of their partnership agreement language to be certain about how to do the withdrawal.
The way I would interpret it is: If no other withdrawals were made in this calendar year then I would allow a full withdrawal in cash for 99.5% of the partner's account. If the partnership wanted to hold to the full withdrawal option to determine how to make payment, the withdrawing partner could get pissy and take all but a buck this year, remain in the partnership until the first quarter of 2023, and essentially force a cash withdrawal anyway. Then the partner would remain on the books next year. You have the cash, just pay your partner out in cash at the 99.5% level and be done with it. I'd also move to eliminate the withdrawal charges that exceed actual costs in your agreement.
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
DrDave on
Yes, our club has a clause like this that allows other members to buy in for a bit more. We also a limitation that no 1 member may own more than 2x of what any other member owns. To keep a balance.
If a member exits in their 1st year, there is a small % fee for that. Otherwise, the exiting member gets their full share minus any costs of the transaction.
I believe this was all part of the general partnership agreement as suggested by Bivio at the time.
When someone resigns or passes away we give the remaining members the opportunity to purchase the shares so we do not have to sell anything and no costs so the check is 100% of the balance. Balance date is determined by the amount of dues this member has paid in ($100 month dues).
Yes we do have a maximum that a member can have up to 10% of the value.
The way I would interpret it is: If no other withdrawals were made in this calendar year then I would allow a full withdrawal in cash for 99.5% of the partner's account. If the partnership wanted to hold to the full withdrawal option to determine how to make payment, the withdrawing partner could get pissy and take all but a buck this year, remain in the partnership until the first quarter of 2023, and essentially force a cash withdrawal anyway. Then the partner would remain on the books next year. You have the cash, just pay your partner out in cash at the 99.5% level and be done with it. I'd also move to eliminate the withdrawal charges that exceed actual costs in your agreement.
Wow, the remaining club members benefit from someone withdrawing. If you have an all cash withdrawal there should be no fee. Write a check or set up a bank transfer.
Actually, it's the other way around. The language doesn't say that the withdrawal valuation is reduced by the lesser of 3% or actual costs. It says that the payment is the lesser of 97% or the withdrawal valuation less actual costs. In this case, 97% is less than 100%.
Thanks for reading. Any suggestion on how you would
interpret the language in the original post? Should the
withdrawing partner have a 3% fee?
Scott Freeman on
Thank Mr. Dunkelberger
I would like to avoid the "World of Hurt" and that is what
prompted me to post. As Mr. Smilovitz we have some
conflicting language. The relevant sections of our agreement
read:
18. Withdrawal by a Partner: Any partner may withdraw a
part or all of his/her interest. He/she shall give notice in
writing to the recording partner. His/her notice shall be
deemed to be received as of the first meeting of the club at
which is presented. If notice is received between meetings
it will be treated as received at the first following
meeting. In making payment the valuation statement prepared
for the first meeting following the meeting at which notice
is received will be used to determine the value of the
partner's account. Between receipt of notice and the
withdrawal valuation date, the other partners shall have and
are given the option during said period to purchase, in
proportion to their capital accounts in the partnership, the
capital account of the withdrawing partner. If the other
partners do not exercise their option to purchase, then the
partnership shall buy the withdrawing partner the value of
his interest in their partnership as shown by the valuation
statement in accordance with paragraph 20 of this
partnership agreement.
20. Purchase Price: Upon the death, incapacity or
withdrawal of a partner, and the exercise of the option to
purchase by the other partners, said other partners shall
pay the withdrawing partners or his estate, as the case may
be, a purchase price, when payment is made in cash, equal to
ninety-seven per cent of his capital account or his capital
account less actual cost of selling sufficient securities to
obtain the cash to meet the withdrawal, whichever is the
lesser amount. Said purchase price shall be paid within two
weeks after the valuation date used in determining the
purchase price. In the case of a complete withdrawal in
liquidation of a partner's entire interest, payment may be
made in cash or securities at the option of the remaining
partners of the club. In the case of a partial withdrawal in
partial liquidation of a partner's interest, payment may be
made in cash or securities at the option of the withdrawing
partner. Where payment is made in securities, the full
purchase price of the account will be paid the partner for
that part of the account purchased with securities. If the
partner desires an advance payment, the club at its earliest
convenience may pay him 80% of the estimated value of his
account and settle the balance of the account in accordance
with the valuation date set in paragraph 18. Where payment
is made in securities, the club's broker shall be advised
that the ownership of the securities has been changed at
least by the valuation date used for the withdrawal.
Amendment
Discounted withdrawal fee
Each calendar year a partner may make one cash withdrawal
with a fee of 0.5%.