Sale of Partnership Interest Agreement
When the sale of a partenrship interest happens, the entity theory becomes the underlying concept as opposed to the aggregate theory. Hence the ownership interest that a partner has is treated as a separate asset that could be purchased and sold. The general rule is that the selling partnr treats the loss or gain on the sale of the capital assets. However, there is an exception to the general rule. This is especially when the partnership entity has certain assest forms. The asset rule also comes into play and the look-through aspect is applied. As such the partners may have to charactersize their lossess or gains on the interest sale. The preceding is subject to various rates of taxes on the forms of asses that are owned by the partnership entities.
In instances where the partenrship owns certain forms of assets, the selling partners should recognize the normal loss or gain and rsect the partner’s shares of the assets. A similar type of exception applies to assets that are subject to gain treatment. Thus, the selling partners should allocate the loss or gain based on the partner’s share of the assets. Such aspects also affect the format that the sale of parternship interest agreement will take.
Elements of a sale of parternship interest agreement
- . Sale of partnership interest
Every effective sale of parternship interest agreement should contain a clause on sale of parternship interest. Precisely, it should state that upon the subject and terms set in the agreement, every seller agrees certain aspects. They include conveying, selling, transferring, assigning, and delivering to the buyer at the closing. Further, all of the seller’s rights, estate, title, and interest in respective interests are cleared. This clause of a sale of parternship interest agreement should outline the security interests, lien, and any encumberances.
Further, the section should state that the sellers release and waive any claims for fees that could be payable by the partnership. This is irrespective of the affiliates. However, the fees that are accrued in the records and books of partnership are exempted.
- . Consideration
- A sale of parternship interest agreement should also highlight the consideration for the interest being sold. Most agreement outline that the buyer shall pay the seller for the partnership interests to the buyer an aggregate amount that is equal to the net proceeds of the sale. The sale is often done to bona fide third party purchasers.
The consideration section of the eufv also defines net sale proceeds. They denote the gorss purchase price of the property less all expenses and costs that are incurred in relation to property sale. The costs and expenses include legal fees, broker feed, transfer fees, conveyance fees, and accounting fees.
- Seller warranties and representations
In the suive, sellers warrant and represent to the buyer several aspects. Such includes that the sellers are the sole general partners of the partnership. Further, that every seller has the necessary authority and power to enter into an agreement. This enables them to perform their respective obligation and consummate the transactions in the sale of parternship interest agreement. They can do this without the authorization or consent of third parties.
Further, the clause states that the sale of parternship interest agreement will contain the valid and legally binding obligations of the seller. Also, that the obligations are enforceable against the seller by the buyer in the event of breach.
Moreover, the clause states that no action, proceeding or litigation will be instituted against the seller. This is with regard to the partenrship interests that might adversely impact the parternership interests of the seller. The sale of parternship interest agreement also states that the conummation of transactions will not constitute a violation of terms or provisions of any other instrument, lease, or agreement.
- . Warranties and representation of the buyer
The buyer warrants and represents to sellers several aspects in the sale of parternship interest agreement. They include:
- The buyer has the requisiste authority and power to enter into the agreement. The same also applies to the performance of obligations in the sale of parternship interest agreement. This can be performed without the consent or authority of the third parties. Further, the agreement is enforceable against the buyer in case of breach of the terms.
- Neither the execution of the sale of parternship interest agreement nor the consummation of transactions contemplted will contitte a violation of the terms or provisions of the agreement.
- There is no proceeding, litigation, or action pending againsts the buyer will be taken without his consent.
- The warranties and reprsentations in the caluse indefinitely survive the completion of transactions.
- Deliveries
The sale of parternship interest agreement should expressly state that the sellers shall execute and deliver to the buyer several aspects:
- i) A sufficient assignment and assumption of partnership interests from the sellers, both in substance and in form. Such include selling, conveying, transferring, assigning, and delivering to the buyer indefeasible title to the respective partnership interests.
- ii) Further documentation as buyers may request from time to time.
In the sale of parternship interest agreement , the buyer also undertakes to deliver several documents for the benefit of the seller by the closing date. Such include the assignment agreement. Also, other instruments and documents that may be required by any provisions of the agreement as may be required.
- Closing date
A sale of parternship interest agreement should also define the closing date. Unless the parties agree in writing, all the transactions shall be closed simultaneously with the execution of the agreement by the parties.
- Satisfaction of indebtness
Before the funsing date, other than other actions provided in the agreement, parties will have a chnace to settle and pay any indebtness. Such includes the closing date debts and fees resulting from the fnial releases, payoff letters, lien discharge and other evidences. The costs also include any irrevocable payoff releases, letter, and liens in advance to the closing date debt.
- Miscellaneous provisions
The sale of parternship interest agreement should also include exhibits that contain the conditions and terms that have been agreed upon. The miscellaneous sections also outlines that no external oral agreements or representations will take precedence.
Further, the sale of parternship interest agreement should outline that any notices shall be delivered personally. Also, that they shall be served personally or served by certified mail or courier services that are recognized nationally.
Other miscelaneous provisions include:
- i) Expenses
Every party to the sale of parternship interest agreement is expected to pay all expenses that are incurred by it. Such relates to the transactions that are contemplated in the agreement. Such includes legal expenses, financial and accounting advisors. For avoidance of any doubt, all the due fees shall be exclusively borne by the seller.
- ii) Governing Law nd Venue
The sale of parternship interest agreement is considered a contract that is made under the laws of Texas. Further, any related or supplemented notices and socuments shall be construed as per the governing laws of the state. With respect of any actions or claims that arise from the Agreemebt, the parties submit to the regional court jurisdiction.
iii) Notices
All the notices that are permitted or required to be given under the agreement are required t be in writing. Further, they are deemde given when they are delivered in person.
- Amendment
An effective sale of parternship interest agreement also contains an amendment clause. It outlines that the exhibits and schedules constituting the whole agreement supercede all prior negotiations and discussions. Such applies to both oral and written agreements. Further, the sale of parternship interest agreement can not be alterere, amended, abridged, or supplemented.
- Assignability and Benefit
This clause provides that the sale of parternship interest agreement is only beneficial to the parties, their heirs, successors, personal representative, and assignees. Moreover, neither the agree nor any interest, obligation, or right under the sale of parternship interest agreement could be assigned by the buyers without the consent of the seller.
- Counterparts
The sale of parternship interest agreement may also be executed in various counterparts. Each of them will be deemed original all of which will be constituted in the sale of parternship interest agreement .
- Remedies
The remedies, rights, privileges and powers in the sale of parternship interest agreement are often cumulative and no exclusive. The preceding are in addition to all the remedies, rights, privileges and powers that are granted by law. Further, the parties in a sale of parternship interest agreement agree that other than the reliefs the agreement outlines, there are others. For instane, enforcing the agreement by mandatory or injunctive reliefs t be issues by or against the rest of the parties. Hence both specific performance and damages will be the suitable relief modes and are not alternative reliefs.
References
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