Table of Contents
- Download an Assignment of Partnership Interest Template
- The Basics: What is an Assignment of Partnership Interest?
- When One Needed
- The Consequences of Not Having One
- The Most Common Situations
- What Should be Included?
1. Download an Assignment of Partnership Interest Template
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2. The Basics: What is an Assignment of Partnership Interest?
An Assignment of Partnership Interest is a legal document that transfers the rights to receive benefits from an original business partner (“Assignor”) to a new business partner (“Assignee”).
This document will identify the following basic elements:
- Partnership Details: legal name of the business, its purpose, and date established
- Assignee: name and address of the new partner receiving the business interest
- Assignor: name and address of the old partner giving the business interest
- Partners: name and address of the remaining partners of the business
- Consideration: amount of money exchanged for the business transfer
- Closing Date: when the assignment will end
- Signatures: all members of the original partnership and the assignee must sign
Check the original partnership agreement, which spells out whether assignments or transfers are allowed and whether the consent of all remaining partners is required.
Assignment of Partnership Interest PDF Sample
The sample assignment of partnership interest below details an agreement between ‘Joseph P Wagnon’ and an employee, ‘Sandra S Childress’, of the partnership, ‘ABC, Inc.’ Sandra S Childress agrees to the transfer of all rights and interests to Joseph P Wagnon.Assignment of Partnership Interest
3. When One is Needed
Why do I need an Assignment of Partnership Interest?
This document is needed to formally document a business transaction occurred between the old partner and the new partner.
Some partnerships agreements contain a right of first refusal so that the original partners have a right to purchase the interest before an outside party.
4. The Consequences of Not Having One
What happens if I do not have one?
Without this document, neither the old or new partner are legally obligated to follow through with their promises to either buy or sell shares of the business. The Assignment may also clarify whether the new partner has the right to participate in the operation, finances, or management of the business. For example, a full fledged partner usually has the right to inspect the books, take possession of partnership property, and make decisions with other partners. Otherwise, the new partner only has the right to receive a share of the profits and any distributions if the partnership ends.
Most partnership agreements only allow the transfer of the partner’s interest in the business so that the new partner can only receive the old partner’s share of money but not have a say in the business operations or finances.
5. The Most Common Situations
An Assignment of Partnership Interest is usually just one of several legal documents needed during the sale process. A Confidentiality Agreement plus a Purchase and Sale Agreement are also used to complete the transaction.
Here are just a few of the situations when this document is commonly used:
- Cash flow needs of the business change
- Business assets are allocated differently
- Strategy of the partnership changes
- Regulatory environment presents new challenges
6. What Should be Included?
An Assignment of Partnership Interest should generally address the following:
- Who will be giving and receiving the business interest
- What rights does the assignee have in terms of operation or management
- Where is the business partnership located
- When was the partnership first established
- How much will the old partner receive in return for giving a part of their interests