Partnership Decision Making

When you become an owner or partner in a practice or company—or enter into a joint venture with a third party—one of the most critical aspects of the arrangement is whether or not you have a say in major decisions.  If you only have one vote, be wary of how many others you have to get to vote along with you to make a decision or cause an act not to occur (i.e., veto authority).  

If you are the founder, you should always make sure that you personally have to vote along with or consent to a major decision in order for it to be made. On the other hand, if you are a new associate without any real say or control of the board or management committee, you need to ensure that you have the right to approve (or veto) certain significant decisions that can affect you and what you are buying into. You can accomplish this by requesting unanimity for certain acts and decisions of the enterprise. The following are examples of the types of decisions that are usually explicitly addressed in an agreement governing company decision making:

1. Hire, engage and fire employees and independent contractors of the company;
2. Entering into and amending any contract or arrangement with any company owned by or affiliated with an owner or his/her family;
3. Expand the company to additional and/or alternative locations;
4. Amend the company’s office lease(s);
5. Allow any third parties to license, rent, occupy or otherwise use the company’s office space and/or resources (including any personnel);
6. Adopt and amend company budgets and make expenditures in excess of or outside of the scope of such adopted budget; 
7. Set aside reserves (other than pursuant to an adopted budget and if more than 90 to 120 days’ worth of working capital needs);
8. Determine the timing and amount of capital contribution requirements of owners (i.e., capital calls);
9. Determine the timing and amount of loans to the company from owners, loan repayments and profit distributions;    
10. Enter into a bank loan and other financing in the name of the company;
11. Entering into loans, financing or leases requiring owner personal guarantees;
12. Bind the company or any owner or employee to any restrictive covenants of any nature;
13. Invest any company funds in time deposits, short-term governmental obligations, commercial paper or other investments (including long-term);
14. Cause the company to make loans to, or guarantee, assume or otherwise become responsible for obligations of any owner or his/her affiliates, or any third party;
15. Determine and change the amount of compensation and benefits, if any, payable to any owner in his/her capacity as manager, director, officer or contractor/employee of the company;
16. Consent to the transfer of an ownership interest in the company (to an existing owner or third party) or any profit sharing arrangement with any third party;
17. Acquire all or substantially all of the assets of, merge with, or acquire a controlling interest in, any other business or entity, or any other business combination of the company; 
18. Authorize or cause the company to sell, transfer, convey, assign or otherwise dispose of or encumber all, substantially all, or any material portion of the company’s assets, or to transfer or assign material agreements; 
19. Issuance of new ownership interests or admission of a new owner;
20. Make, execute or deliver any general assignment for the benefit of the creditors of the company;
21. File for bankruptcy on behalf of the company;
22. Dissolve the company; 
23. Return an owner’s capital contributions;
24. Confess a judgment against the company;
25. Approve advertising, marketing and branding including content and strategy (including social media account usage, press releases and otherwise).