Help... again! We are just over one year old and we have a
member who wants out. We figured what it would cost and are
trying to follow the guidelines of our Partnership
Agreement. It came up at our last meeting that we should
just assess the remaining 10 members $45 each and then give
the quitting member his money. Will this work? How do I
get him off the books with our broker (Scottrade) if this is
the case?

Thanks for your help.

Johnny

Johnny:

You asked two questions:

1. “We should just assess the remaining 10 members $45 each
and then give the quitting member his money. Will this
work?”

Yes, raising cash to pay off a withdrawing member may be the
most expedient method. You should enter the money received
from each member in the same manner as their normal monthly
contribution. That means enter the amount paid by each
member as a member payment with the appropriate date of
transaction and date of unit valuation. The result will be
for the remaining partners to purchase additional units
based on the amount of additional money they pay. Unless
your partnership agreement contains a limitation, there is
no accounting reason for each remaining member to pay the
same additional amount.

2. “How do I get him off the books with our broker
(Scottrade)?”

The simple answer is, ask Scottrade what paperwork they
require. The last time I had to submit a new signature form
for our account at our brokerage house, I had to submit a
copy of the letter of resignation of the departed member. I
use the term “departed” instead of departing” because I
submitted the new signature form months after the member had
departed. I now have a signature form with the broker that
contains only four of the fifteen members of our
partnership. These are the four people we want to have
trading power in case the primary is unavailable. We have
had members join and leave who have never appeared on the
brokerage paperwork. This procedure may not be in strict
compliance with the requirements of the brokerage house, but
it is has saved lots of paperwork over the years as the four
declared partners have remained stable members of the
partnership and none of the other partners have cared
whether they were on the brokerage account.

Jack Ranby




Johnny wrote:
> Help... again! We are just over one year old and we have a
> member who wants out. We figured what it would cost and are
> trying to follow the guidelines of our Partnership
> Agreement. It came up at our last meeting that we should
> just assess the remaining 10 members $45 each and then give
> the quitting member his money. Will this work? How do I
> get him off the books with our broker (Scottrade) if this is
> the case?
>
> Thanks for your help.
>
> Johnny

Thanks again Jack! I hate to abuse your help, but we
collect quarterly so that we can have funds in there to vote
on purchases each month. Is there any reason why I can't
use some of the money out of that stash to pay the member
who is departing?

Also, when he leaves, what happens to his shares? What do I
do with his units? Is it as simple as distributing them
evenly (as much as possible ) to the remaining 10 members?
Is that what you meant by "remaining partners purchasing
additional units"? Do I simply make the adjustment by
editing each member's contribution?

Thanks so much!

Johnny


John W Ranby wrote:
> Johnny:
>
> You asked two questions:
>
> 1. “We should just assess the remaining 10 members $45 each
> and then give the quitting member his money. Will this
> work?”
>
> Yes, raising cash to pay off a withdrawing member may be the
> most expedient method. You should enter the money received
> from each member in the same manner as their normal monthly
> contribution. That means enter the amount paid by each
> member as a member payment with the appropriate date of
> transaction and date of unit valuation. The result will be
> for the remaining partners to purchase additional units
> based on the amount of additional money they pay. Unless
> your partnership agreement contains a limitation, there is
> no accounting reason for each remaining member to pay the
> same additional amount.
>
> 2. “How do I get him off the books with our broker
> (Scottrade)?”
>
> The simple answer is, ask Scottrade what paperwork they
> require. The last time I had to submit a new signature form
> for our account at our brokerage house, I had to submit a
> copy of the letter of resignation of the departed member. I
> use the term “departed” instead of departing” because I
> submitted the new signature form months after the member had
> departed. I now have a signature form with the broker that
> contains only four of the fifteen members of our
> partnership. These are the four people we want to have
> trading power in case the primary is unavailable. We have
> had members join and leave who have never appeared on the
> brokerage paperwork. This procedure may not be in strict
> compliance with the requirements of the brokerage house, but
> it is has saved lots of paperwork over the years as the four
> declared partners have remained stable members of the
> partnership and none of the other partners have cared
> whether they were on the brokerage account.
>
> Jack Ranby
>
>
>
>
> Johnny wrote:
> > Help... again! We are just over one year old and we have a
> > member who wants out. We figured what it would cost and are
> > trying to follow the guidelines of our Partnership
> > Agreement. It came up at our last meeting that we should
> > just assess the remaining 10 members $45 each and then give
> > the quitting member his money. Will this work? How do I
> > get him off the books with our broker (Scottrade) if this is
> > the case?
> >
> > Thanks for your help.
> >
> > Johnny

Johnny:

I see Rip has answered while I was composing my response.
His answer cuts to the chase. However, I will post my
response since it is already composed.

You asked:

1. “Is there any reason why I can't use some of the money
collected to purchase more stock to pay the member who is
departing?”

There is no reason. The assets of the partnership consists
of the stock it owns plus the cash in its account. The cash
is available to use for whatever purpose the membership
votes to use it for, including paying off departing members.

2. “Also, when he leaves, what happens to his units? Do I
simply make the adjustment by editing each member's
contribution?”

I will first answer your questions from a practical
standpoint. I assume you are using bivio software to keep
the books of your partnership because you are asking
questions through the bivio website. If this is true, you
simple need to follow the steps in the bivio software to
process the withdrawal of the departing member. The software
will handle the calculation of the proper amount to write
the check to the departing member and will adjust the total
units of the partnership automatically. You will not need to
make any manual adjustments. Remember, the accounting for
the collection of money from members, whether it is used to
purchase stock or pay off a member, is a separate
transaction in bivio from the transaction to withdraw a
member.

From a more technical standpoint, remember two principles of
investment club partnership accounting: 1) when a partner
contributes money, the partner gets more units and the total
units in the partnership increase by the same number; and 2)
when a partner withdraws, the partner’s units are decreased
and the total number of units in the partnership are
deceased by the same number. The withdrawal of one partner
does not change the number of units owned by the remaining
partners. Example, if a partnership has ten partners and
each partner has ten units, the total units in the
partnership would be 100. If one withdraws, each partner
still has ten units and the total units in the partnership
would be 90. If each unit was worth $1.00, each partner’s
value in the partnership would be $10.00 and remain the same
before and after the withdrawal. Before the withdrawal, the
total value of the partnership would be $100 and after
$90.00. So the value and number of units of the remaining
partners remain the same, the only change is that the
ownership percentage of each remaining partner. Before the
withdrawal, each partner owned ten percent of the
partnership. After, each partner owns 10/90 or 11.111%

I hope that answers your questions.

Jack Ranby



Johnny wrote:
> Thanks again Jack! I hate to abuse your help, but we
> collect quarterly so that we can have funds in there to vote
> on purchases each month. Is there any reason why I can't
> use some of the money out of that stash to pay the member
> who is departing?
>
> Also, when he leaves, what happens to his shares? What do I
> do with his units? Is it as simple as distributing them
> evenly (as much as possible ) to the remaining 10 members?
> Is that what you meant by "remaining partners purchasing
> additional units"? Do I simply make the adjustment by
> editing each member's contribution?
>
> Thanks so much!
>
> Johnny
>
>
> John W Ranby wrote:
> > Johnny:
> >
> > You asked two questions:
> >
> > 1. “We should just assess the remaining 10 members $45 each
> > and then give the quitting member his money. Will this
> > work?”
> >
> > Yes, raising cash to pay off a withdrawing member may be the
> > most expedient method. You should enter the money received
> > from each member in the same manner as their normal monthly
> > contribution. That means enter the amount paid by each
> > member as a member payment with the appropriate date of
> > transaction and date of unit valuation. The result will be
> > for the remaining partners to purchase additional units
> > based on the amount of additional money they pay. Unless
> > your partnership agreement contains a limitation, there is
> > no accounting reason for each remaining member to pay the
> > same additional amount.
> >
> > 2. “How do I get him off the books with our broker
> > (Scottrade)?”
> >
> > The simple answer is, ask Scottrade what paperwork they
> > require. The last time I had to submit a new signature form
> > for our account at our brokerage house, I had to submit a
> > copy of the letter of resignation of the departed member. I
> > use the term “departed” instead of departing” because I
> > submitted the new signature form months after the member had
> > departed. I now have a signature form with the broker that
> > contains only four of the fifteen members of our
> > partnership. These are the four people we want to have
> > trading power in case the primary is unavailable. We have
> > had members join and leave who have never appeared on the
> > brokerage paperwork. This procedure may not be in strict
> > compliance with the requirements of the brokerage house, but
> > it is has saved lots of paperwork over the years as the four
> > declared partners have remained stable members of the
> > partnership and none of the other partners have cared
> > whether they were on the brokerage account.
> >
> > Jack Ranby
> >
> >
> >
> >
> > Johnny wrote:
> > > Help... again! We are just over one year old and we have a
> > > member who wants out. We figured what it would cost and are
> > > trying to follow the guidelines of our Partnership
> > > Agreement. It came up at our last meeting that we should
> > > just assess the remaining 10 members $45 each and then give
> > > the quitting member his money. Will this work? How do I
> > > get him off the books with our broker (Scottrade) if this is
> > > the case?
> > >
> > > Thanks for your help.
> > >
> > > Johnny

I'm finding that the best part of bivio is how helpful the
members are! Thank you for clarifying and holding my hand
through this. I think I am making it harder than it needs
to be, but most of that is justing fearing the unknown.

Thanks again!

Johnny


Rip West wrote:
> Jack's answer was far more complete than mine. However, one thing that he
> said needs further clarification.
>  
> <<
> Example, if a partnership has ten partners and each partner has ten units,
> the total units in the partnership would be 100. If one withdraws, each partner
> still has ten units and the total units in the partnership would be 90. If each
> unit was worth $1.00, each partner’s value in the partnership would be $10.00
> and remain the same before and after the withdrawal.
> >>
>  
> It's true that a withdrawal will not change the unit value of the remaining
> partner's units, UNLESS a withdrawal fee was paid. If a withdrawal fee is paid,
> the unit value of the remaining partners will change.
>  
> FWIW, I am against withdrawal fees.
> Rip West
> Saint Paul, MN

Thanks Rip for the clarification. I did not think about a
withdrawal fee as our 21-year old club has never had a
withdrawal fee, and I seriously doubt would ever do so. We
want willing partners and would not want to penalize anyone
who felt it was time to leave.

Jack

Rip West wrote:
> Jack's answer was far more complete than mine. However, one thing that he
> said needs further clarification.
>  
> <<
> Example, if a partnership has ten partners and each partner has ten units,
> the total units in the partnership would be 100. If one withdraws, each partner
> still has ten units and the total units in the partnership would be 90. If each
> unit was worth $1.00, each partner’s value in the partnership would be $10.00
> and remain the same before and after the withdrawal.
> >>
>  
> It's true that a withdrawal will not change the unit value of the remaining
> partner's units, UNLESS a withdrawal fee was paid. If a withdrawal fee is paid,
> the unit value of the remaining partners will change.
>  
> FWIW, I am against withdrawal fees.
> Rip West
> Saint Paul, MN

Rip (or anyone),

I can get to Accounting/Members, but I have no Withdraw
option. I'll keep searching, but appreciate any feedback.

Thanks!

Johnny

Rip West wrote:
> Johnny,
>  
> You are making this harder than you need to. You can use whatever cash is
> on hand to pay off the withdrawing member. Just go to
> Accounting!Members!Withdraw, and follow the instructions on the entry form, and
> the software will take care of the rest.
>  
> Rip West
> Saint Paul, MN

Nevermind. Found it!

Johnny wrote:
> Rip (or anyone),
>
> I can get to Accounting/Members, but I have no Withdraw
> option. I'll keep searching, but appreciate any feedback.
>
> Thanks!
>
> Johnny
>
> Rip West wrote:
> > Johnny,
> >  
> > You are making this harder than you need to. You can use whatever cash is
> > on hand to pay off the withdrawing member. Just go to
> > Accounting!Members!Withdraw, and follow the instructions on the entry form, and
> > the software will take care of the rest.
> >  
> > Rip West
> > Saint Paul, MN