questions on General Partnership's 20%
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questions on General Partnership's 20% Hi, I have a question on General Partnership's item #6: "6. Capital Contributions. The partners may make capital contributions to the partnership on the date of each periodic meeting in such amounts as the partnership shall determine; provided, however, that no partner's capital account shall exceed twenty percent (20%) of the capital accounts of all partners." My question is in regard to "...no partner's capital account shall exceed twenty percent (20%)..." If I were to set no limit on percent of ownership, would it cause harm to my club? What are some of negatives of setting no limit? Is this 20% set in the stone? I am asking since some members can contribute more and their account could exceed 20%. Thanks! richard That clause is suggested so that no one partner will dominate the investment decisions. If your club has adopted the one person, one vote rule, the clause is unnecessary. Having said that, it may well be that no member will want to own a large percentage of the club if he/she can be easily outvoted by a simple majority. Others have concerns that if a 25% partner decides to leave, the club will have problems paying that partner off. I don't worry about that. You can always pay that partner using appreciated stock, so your club will survive, just on a smaller scale. Rip West Saint Paul, MN I understand what it means now. Thank you for the info! Rip West wrote: > That clause is suggested so that no one partner will dominate the > investment decisions. If your club has adopted the one person, one vote > rule, the clause is unnecessary. Having said that, it may well be that > no member will want to own a large percentage of the club if he/she can > be easily outvoted by a simple majority. > > Others have concerns that if a 25% partner decides to leave, the club > will have problems paying that partner off. I don't worry about that. > You can always pay that partner using appreciated stock, so your club > will survive, just on a smaller scale. > > Rip West > Saint Paul, MN |
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