Free Transfer of Partnership Interest

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Transfer of Partnership Interest

QGFullPartnership


Full Partner Rights
Economic Rights


Full partnership rights usually require consent from remaining partners as they give the new partner the right to participate in business operations and management. Economic rights refer to the old partner’s financial interest or share of profits. If the remaining partners have not admitted the assignee as a new partner, you can still transfer economic rights without full partnership rights.



Your Transfer of Partnership Interest

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TRANSFER of PARTNERSHIP INTEREST

THIS TRANSFER (the "Transfer") made and entered into this ________ day of ________________, ________

AMONGST:

______________________________ of ______________________________
(the "Transferor")

OF THE FIRST PART

- AND-

______________________________ of ______________________________
(the "Transferee")

OF THE SECOND PART



- AND-

_________________________ of _________________________
(the "Remaining Partner")

OF THE THIRD PART

  1. BACKGROUND
  2. The Transferor is the holder of a partnership interest (the "Interest") in ______________________________ (the "Partnership"), a partnership previously established on the 30th day of January, 2023, for the purpose of ____________________________________________________ and formed in accordance with an agreement (the "Partnership Agreement").
  3. The Transferor desires to transfer the Interest to the Transferee and the Transferee desires to acquire the Interest from the Transferor.
  4. The Interest acquired by the Transferee will include all rights in the Partnership previously afforded to the Transferor including the status as partner. The Remaining Partner has agreed and gives consent to such transfer according to the terms and conditions of this Transfer.

IN CONSIDERATION OF and as a condition of the parties entering into this Transfer and other valuable consideration, the receipt and sufficiency of which consideration is acknowledged, the parties to this Transfer agree as follows:

  1. Sale and Purchase
  2. By this Transfer the Transferor withdraws from the Partnership and to the fullest extent permitted by the Partnership Agreement, transfers all its rights, interests, title and benefits in the Partnership to the Transferee. The Transferee will become a partner in the Partnership taking the place of the Transferor in the Partnership with all the rights and obligations previously afforded to the Transferor. The Transferee, as a partner in the Partnership, will be bound by the terms and conditions of the Partnership Agreement as amended. On transfer of the Interest to the Transferee, the Transferor will cease to be a partner in the Partnership.
  3. Consideration
  4. As full consideration for the transfer of the Interest the Transferee has submitted and the Transferor has accepted the following consideration: _______________________________________________
  5. Closing
  6. The closing of the purchase and sale of the Interest (the "Closing") will take place on the 30th day of January, 2023 (the "Closing Date") at the offices of the Transferor or at such other time and place as the Transferor and Transferee mutually agree.
  7. Representations and Warranties of the Transferor
  8. The Transferor warrants that the Transferor has a partnership interest in the Partnership and that the Transferor has the legal right to execute and perform a transfer of the Interest exclusive of the Transferor's status as partner.
  9. The Transferor warrants that the Interest is free and clear of all liens, encumbrances, restrictions and claims.
  10. The Transferor warrants that on completion of this Transfer the Transferor will retain no residual interest or interests in the Partnership.
  11. The Transferor warrants that the Transferor is not in any way in default of any of the expressed or implied terms and conditions of the Partnership Agreement. The Transferor also warrants that this Transfer is in full compliance with all terms and conditions of the Partnership Agreement.
  12. The Transferor warrants that the Transferor is not bound by any other contractual agreement or legal requirement that would be violated by this Transfer.
  13. The Transferor warrants that it has provided the Transferee with the most current copy of the Partnership Agreement inclusive of all amendments.
  14. The Transferor warrants that no other consent is required from any third party or government entity authorising this Transfer except for those consents of the Remaining Partner contained in this Transfer.
  15. Transferee's Obligations
  16. On Closing of this Transfer, the Transferee will observe and perform any and all terms and conditions of the Partnership Agreement, relating to the newly acquired rights, that were previously binding on the Transferor.
  17. Transitional Rights and Obligations
  18. To the full extent permitted by the Partnership Agreement, all income, rights, benefits, obligations and liabilities of the Interest will belong to the Transferor before the Closing and will transfer to the Transferee after the Closing.
  19. Consent of Remaining Partner
  20. The Remaining Partner consents to the terms and conditions of this Transfer with the intent that the Transferee will become a partner in the Partnership with all of the rights, benefits, obligations and liabilities previously afforded to the Transferor under the Partnership Agreement as amended.
  21. Governing Law and Jurisdiction
  22. This Assignment will be construed in accordance with, and exclusively governed by the laws of .
  23. The Transferor and the Transferee submit to the jurisdiction of the courts of  for the enforcement of this Transfer or any arbitration award or decision arising from this Transfer.
  24. Miscellaneous
  25. Time is of the essence in this Transfer.
  26. This Transfer may be executed in counterpart. Facsimile signatures are binding and are considered to be original signatures.
  27. All warrants and representations of the Transferor and the Transferee connected with this Transfer will survive the Closing.
  28. This Transfer will not be assigned either in whole or in part by any party to this Transfer without the written consent of the other party.
  29. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Transfer. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in the neuter gender include the masculine gender and the feminine gender and vice versa.
  30. If any term, covenant, condition or provision of this Transfer is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Transfer will in no way be affected, impaired or invalidated as a result.
  31. This Transfer contains the entire agreement between the parties. All negotiations and understandings have been included in this Transfer. Statements or representations which may have been made by any party to this Transfer in the negotiation stages of this Transfer may in some way be inconsistent with this final written Transfer. All such statements are declared to be of no value in this Transfer. Only the written terms of this Transfer will bind the parties.
  32. This Transfer and the terms and conditions contained in this Transfer apply to and are binding upon the Transferor, the Transferee, the Remaining Partner and their respective successors, assigns, executors, administrators, beneficiaries, and representatives.
  33. Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to the parties at the addresses contained in this Transfer or as the parties may later designate in writing.
  34. All of the rights, remedies and benefits provided by this Transfer will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.

IN WITNESS WHEREOF the Transferor, the Transferee and the Remaining Partner have duly affixed their signatures under hand and seal on this ________ day of ________________, ________.


_____________________________
Witness


_____________________________
______________________________


_____________________________
Witness


_____________________________
______________________________

_____________________________
Witness


_____________________________
_________________________

Last updated November 14, 2022

What is an Assignment of Partnership Interest?

When a business partner wishes to retire or leave the company, the parties can use an Assignment of Partnership Interest to transfer their stake to someone else and continue doing business

This document details the terms and conditions of the transfer. For instance, it should specify whether the new partner is an individual or a business entity. It can also state if they’ll receive full partnership rights or economic rights only.

An Assignment of Partnership Interest is also known as:

  • Transfer of Partnership Interest Form
  • Sale of Interest in Partnership 
  • Partnership Assignment

How do I value a partnership interest?

The original Partnership Agreement should outline the value of a partnership interest. For example, this could comprise of cash investments, time and effort, vehicles, office space, furniture, and more.

Often in these agreements, a partner’s interest is equal to their capital contributions. It may be expressed as a percentage of the total capitalised value of the partnership. If the parties cannot agree on the value of the interest they, can conduct an independent appraisal of the contributions at fair market value.

Do other partners have a say in who buys the interest in a partnership?

Yes, most Partnership Agreements outline terms for selling or transferring an interest in a business. They often place some restrictions on the nature of the interest which may be acquired. As such, it’s essential to consult the original contract.

For instance, partners might limit assignments to economic interests and rights until the remaining partners approve their admission to the partnership. This prevents new partners from gaining voting rights and managerial input without the approval of the remaining partners. In this case, the Partnership Agreement would outline a process for the remaining partners to follow when granting full admission into the partnership.

How do I assign a partnership interest?

Customise LawDepot’s document template to assign partnership rights as needed. Simply answer our questionnaire to generate your document, then download it as a PDF or print out a copy. The information you’ll need to create your Assignment of Partnership Interest is as follows.

1. Partnership details

First, specify whether you’re giving full or economic rights (this often depends on whether remaining partners agree to admit the new partner). Then, select your jurisdiction to modify the template to the applicable laws. 

State the partnership’s name, purpose, and date it was established. 

You’ll also need to provide the names and contact information of the parties involved (e.g., old, new, and remaining partners).

2. Terms of the assignment

Describe the consideration that the new partner will pay in exchange for the partnership interest. Consideration can include money, services, or some other benefit. 

State when the agreement goes into effect. 

If there are any terms you need to add, our template provides guidelines for writing them. However, most assignments don’t need any extra terms.

3. Final details

If needed, you can specify when you’ll sign the agreement and if there will be witnesses present. Although the law doesn’t require witnesses for a partnership assignment, it’s still a good idea if the contract ever gets challenged. In this case, having a witness helps confirm the signatures on the document.

What are the tax consequences of assigning a partnership interest?

All partnerships must register with the Income Tax Department and keep updated information about the business and its partners. 

This means updating the personal details of each partner and reporting any capital gains or losses from the assignment.

Any further tax consequences depend on your situation. Talk to an accountant to learn more.

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