Q I am thinking of buying-out my existing partner and perhaps taking on a new partner, what advice can you offer and what pitfalls can be avoided?

Buying out a partner is quite different from taking on a partner. At the inception of a partnership, consideration should be given to exit strategies, whether the result of death, disability or disagreements. For the former, buy-sell agreements should be in place and formulas agreed upon as to valuations. It is quite easy if done at the inception but quite contentious if attempting to do so without a prior agreement.

Taking on a partner is a very serious matter that must be well planned and thought out. Too often decisions are made along the line of strictly thinking of the financial ramifications and without taking into account the operating decisions that will be made in the future. Defining responsibilities and functions with a clear understanding as to each and who has the ultimate authority is extremely important. Of course, these understandings should be documented and each of the partners should be well represented by attorneys who are familiar with the restaurant industry. If a clear understanding as to expectations is not known and agreed upon before the transaction is consummated, it is practically impossible to do so later. Misunderstandings lead to friction, friction leads to inefficiencies, inefficiencies lead to the business suffering and everyone is unhappy.

The information given is provided for general, non-specific educational purposes only, and should not be relied upon as advice relating to your specific circumstances. For company-specific advice, consult directly with your tax advisor.

James Conniff is the Managing Partner at Bacall & Conniff, P.C., a full service CPA firm that provides industry specific accounting solutions for restaurateurs. Their services include: Weekly flash reports, Monthly financial statements, Web-accounting, Optional bookkeeping & payroll services, and Comprehensive tax & advisory services. They can be reached at 617-367-3250.

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