Forming A Corporation In New York Upon Retiring From A Professional Practice

This is a short article on realizing value upon retiring from a professional practice

, where the professional practice consists of at least several owners.

Upon retiring from a professional practice, one goal is to be paid money to live on during your retirement, including realizing value for your interest in the professional practice. In order to do so you will need to, in effect, create a market.

By far, the best way to create a market is to negotiate and enter into a buy-sell agreement with the other owners of the practice. The best time to begin negotiating the buy-sell agreement is early on, when the relative bargaining power of each professional is more or less the same.

If upon retirement you do not have in place a buy-sell agreement, who will buy your interest in the practice? Dont rely on your fellow owners - what would be their incentive to pay you money for your interest in the practice? After all, you will be retiring and will no longer be contributing to the practice.

Also, if you wait many years and then begin to try to negotiate a buy-sell agreement with your fellow owners, you may find it difficult if not impossible to do so. This will typically be the case because your fellow professionals at that time may be of substantially different ages, with some generating more income for the practice and others generating less income, and each of them will have relatively different bargaining power. By way of example, younger owners may balk at agreeing to pay you anything substantial. After all, they are already owners in the practice and why would they want to agree to have a significant portion of their future earnings go to you in your retirement?

In order to ensure that a buy-sell agreement will provide some money to you in your retirement, it should contain at least the following:

It would require the professional practice and/or the other professional owners to buy-out your interest, that is, a buy-out would be mandatory and not merely optional.

The buy-sell agreement would set the price of the buy out. The method of establishing the price probably should be kept relatively simple and should be a method that would change to reflect the value of the overall practice and the relative contribution of the retiring owner. Examples of ways to do this would be to have the price be based upon some percentage of the professional practices average gross billings for the previous several years or a multiple of the individual billings of the retiring owner over the past several years.

The buy-sell agreement would also determine how the buy out price is to be paid, typically some combination of an initial lump sum and periodic payments over a period of time.

The buy-sell agreement might also fix a retirement age.

Having a buy-sell agreement in place is also an attractive benefit for hiring new professionals. While a newly hired professional likely would be, at first, an employee and not an owner, he or she would know that, if they become an owner, when they retire there will be some value for them for their interest in the practice.

Finally, it is important to note that a buy-sell agreement will also include other provisions unrelated to the retirement of an owner, such as what happens upon the death or disability of an owner, and what happens when an owner wants to voluntarily withdraw from the professional practice prior to retirement age.

by: Project

POST COMMENT

Holiday Bazaar - Online Shopping Is The New Shopping Trend Teeth Whitening In New York 2012 We Fashion And New Sorts Cocktail Gowns Fashion And New Types Cocktail Gowns 2012 For We Fashion And New Sorts Cocktail Gowns 2012 Always Best Care Senior Services Expands With New Franchise In Arizona! The Advantages And Disadvantages Of Solar Energy Brand New Iberosar Hotel In Cancun Opening This December With Special Discounts Bbc Unveils Findings Of New Pyramids In Egypt What's New In 2012 Ford Focus Bullying New York Leaves Young Children Devastated Interior Designing: A New And Elegant Look Uncontested Divorce New York: The Way To Reduce Stress & Cost