Hello all,

I have been offered partnership in the firm (LLP operating in England) that I am currently the senior employee of. It’s a small family business and this point has been a long time coming as I am the last working member of the families (no other children) succession plan and he is now prepping for retirement. I am more the qualified for the role itself and have a proven track record creating, building and selling my own small businesses in the past (all limited companies with myself as the sole everything) along with 10 years in this business.

The current plan is for me to come in as a fixed share partner until the phased retirement begins, then become an equity partner gradually taking more equity as the boss steps away from the firm. At some point he will be fully out day to day and just take the profit proportionate to his equity at that point, eventually he will be gone fully for one reason or another and I will need to do the same process to replace myself eventually; the circle of life continues.

Today I managed to accidentally obtain a copy of the partnership agreement that I am going to be presented with in the coming days/weeks and to say that I was underwhelmed is an understatement. The boss doesn’t know I have seen this and I don’t plan to reveal my hand too soon but I wondered if anyone had been a fixed share partner in an LLP before and progressed to equity partner and how the mechanics of that worked?

Specially the bits of the agreement that have caused my concern are; - my fixed share (effectively my salary) will be agreed between me and the equity partners for the financial year. Thereafter at the “absolute discretion” of the equity partners my fixed share can be maintained, increased or reduced. Therefore my salary is set with my agreement for one year, but next year it could be halved or stopped and I would have no recourse. Is this a normal position for a fixed equity partner to be in and you just trust that the equity partners need you to keep bringing in the bacon so it’s not in their interests to drive you out with sub standard salaries? It sounds like a recipe for easily forcing someone out because they are no longer an employee and don’t have the protection that brings so if you cut their pay they have no choice but to leave, it’s not a million miles away from casual employment. - the next clause allows me to obtain a non equity based annual pay out, a profit share, again at the discretion of the equity partners. On paper this sounds great but I have been led to believe that a fixed share partner cannot hold equity or you are having your cake and eating it in HMRC’s eyes. Has any one been in the same position and been jeopardised by taking profit from equity you don’t own? - One clause I am particularly salty about is that I will not be entitled to see the LLP’s finances other then what pertains to my fixed share payments. This is a red flag to me as a huge trust problem, as how can I run their family business for them if I don’t know how it’s doing. Again, is this normal to restrict a junior partners access to LLP information? - Any type of partner can be dismissed by the others and there are specified reasons listed that are acceptable, misconduct etc. then a very vague clause where the equity partners can give the fixed share partners 6 months warning that they don’t think you are contributing enough, if you don’t rectify this highly intangible problem they can see you off. Again, is that a normal LLP provision? - my last gripe is that this agreement makes no provision for my progression to equity partnership which makes me think I will be sacrificing my rights as an employee for a less secure manner of job where my pay or in fact job can disappear with little warning. And for that risk I won’t be gaining any guaranteed access to equity in the future.

Please understand we haven’t talked turkey yet so I don’t know if there’s a good salary attached to this, it would have to be at this point to mitigate the issues raised above. Critically I am also not desperate to sign this, I don’t feel I need to sell my soul to get my foot in the door. I have time my side with 30 years of working life left, the boss on the other hand does not want to be working 5 years from now. It goes without saying that I plan to take legal advice however this agreement is so far away from what I can sign up to that taking that advice at this point would be a waste of money, our positions are too far apart.

Any thoughts welcome and thank you in advance.

(Will cross post to r/smallbusinessadviceuk)