Home Forums Reply To:

#5333
wpdev
Participant

Partner draws are normally a percentage, somewhere between 40% and 60%, of overall budgeted compensation, paid out in 12 monthly installments. The balance of budgeted compensation is normally paid out in quarterly distributions, at tax installment time, cash permitting, and allowing for a reserve of undistributed income (10% to 15% is considered normal range). I’m not sure exactly what you are asking, but the limit on a draw is usually determined by the partnership agreement. The limit on undistributed income is not always formulaic. It depends on how conservative your cash management is. Hopefully this helps.

PS: some firms allow partners to draw from their equity account and the rules for that could be very unique to the individual firm. Rules would likely be found in the partnership agreement.