Partnership Agreement
Operating Agreement
Expense Reimbursement Clause
Nominee Clause
The following information is provided “as is” to give you ideas of what might be involved. A qualified attorney should be retained to prepare appropriate documents for signature. We are not attorneys, we do not practice law and we do not recommend acting until you retain a qualified attorney on your own.
A partnership agreement is used for partnerships whereas an operating agreement is used for Limited Liability Companies (LLC’s). A corporation has minutes. These determinations are made under State law and how the entity is treated for federal income tax purposes does not matter.
IRS Publication 541, page 4 says that “The partnership agreement includes the original agreement and any modifications. The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. The agreement or modifications can be oral or written. Partners can modify the partnership agreement for a particular tax year after the close of the year but not later than the date for filing the partnership return for that year. This filing date doesn’t include any extension of time. If the partnership agreement or any modification is silent on any matter, the provisions of local law are treated as part of the agreement.”
Most multi-member LLC’s are taxed as a partnership. Therefore the two terms: “LLC” and “partnership” may occasionally be found to be used interchangeably.
A multi-member LLC has members or principals while a partnership has partners, and the three terms: “members,” “principals” and “partners” may occasionally be found to be used interchangeably.
An s-corporation (s-corp) is an income tax classification. Prior to 1996 all s-corps were corporations. But starting with the so-called “check the box” regulations (Treasury Decision 8697) that were adopted in 1996, an s-corp is an income tax classification that can also be used by partnerships and LLCs and rarely by individuals.
When electing to be taxed as an s-corp using IRS Form 2553, the LLC is deemed to have made a “check the box” choice to be taxed as an association pursuant to Regs. Sec. 301.7701-3(c)(1)(v)(C) without the need to file IRS Form 8832. See Electing S Corporation Status for a Limited Liability Company.
Here is a collection of information regarding boilerplate partnership agreements and operating agreements:
unreimbursed expenses clause that may be inserted in the agreements (this is required if any tax deductions for unreimbursed partnership/LLC entity expenses are going to be taken directly on Form 1040, Schedule E, Part II) – generally not applicable with an s-corporation or c-corporation.
reimbursed expenses clause that may be inserted in the agreements (this requires that the entity shall pay or reimburse or treat as a capital contribution or a loan all expenses in order to have them deductible on the entity’s tax return) – generally a good idea for an s-corporation or c-corporation.
unreimbursed expenses for an s-corporation have their own unique problems
nominee account clause that may be inserted in agreements (regarding the bare legal title on accounts)
information on partnership agreements
boilerplate partnership agreement
boilerplate partnership agreement another example
Five Clauses Every Partnership Agreement Needs
boilerplate LLC member-managed operating agreement
boilerplate LLC member-managed Connecticut operating agreement
boilerplate LLC manager-managed Connecticut operating agreement
The following paragraphs are provided “as is” to give you ideas of what might be involved. A qualified attorney should be retained to prepare appropriate documents for signature. We are not attorneys, we do not practice law and we do not recommend acting until you retain a qualified attorney on your own.
Business expenses paid out of pocket:
Business activities should be kept separate from personal activities . It is preferable to have the entity pay for all of its business expenses form the entity’s checking account and to have one credit card that is used solely for business expenses (no personal expenses).
It is also common that from time-to-time the partners/members need to pay for business expenses out of their own pocket. There should be an agreement, an understanding, about just how to handle these payments. One method is for an “expense report” with attached invoices to be submitted to the entity for reimbursement payments made by the entity back to the owner. With this method the owners generally may not deduct expenses directly on their own Form 1040 tax return. Rather the deduction runs through the entity, most preferably with a cash reimbursement made in the same year as the owner incurred the expense on behalf of the entity and paid for that expense.
Another method is for the entity to require the owners to pay for business expenses without getting reimbursed.
Unreimbursed Business Expenses paid by the owners of the business The Partnership’s Partnership Agreement or the LLC’s Operating Agreement might contain a clause saying that it is agreed that each (general partner or active member) is expected to incur and pay these types of expenses as a condition of ownership in the venture. This clause allows the expenses paid for by the owner to be fully deductible without limitation on their personal Form 1040, Schedule E, Part II, when appropriate. (Internal Revenue Code §162)
Caution: According to the Tax Court, unless an agreement between a partnership and a partner states otherwise, then by default a partner cannot deduct expenses on his or her personal tax return if they were incurred on the partnership’s behalf, because it is not “necessary” that a partner pay for them with his own funds. The logic being that IRC §162 requires such deductions be “ordinary and necessary.” (this also holds true regarding LLC members of an LLC taxed as a partnership)
Michael T. Hines, TC Suture. Op. 2004-55
Thomas J. Spielbauer, T.C. Memo. 1998-80
Peter A. McLauchlan, TC Memo 2011-289
Note: When there is no such clause regarding Code §162 “ordinary and necessary” and “trade or business” Unreimbursed Business Expenses that allows for an “above the line” deduction on Schedule E, Part II, nonetheless it may be possible to take these as itemized deductions as IRC §162 “trade of business expenses” or IRC §212 “expenses for production of income” investment related expenses on their personal Form 1040, Schedule A, line 23, when appropriate. Similarly, shareholders, employees. limited partners, and non-management owners may also be allowed an itemized deduction for such expenses incurred. (Craft, T.C. memo 2005-197)
There are two exceptions: (1) performing artists with AGI under $16,001 and more than one employer (2) educators to the extent of $250 in expenses annually.
Caution: Different rules for S-Corporations. Unreimbursed expenses incurred by non-employee S-corporation shareholders are generally not deductible (Russell v. Commissioner TC Memo 1989-207 and Foust v. Commissioner TC Memo 1997-446). An S corporation’s expenses are deductible at the corporate level only, and cannot be deducted by shareholders.
In the case of Richard R. Russell, the S corporation’s shareholders personally paid for expenses they incurred in conducting the corporation’s business. The shareholders did not seek reimbursement from the corporation, and deducted the expenses as business expenses on Schedule C of their personal tax returns. The IRS disallowed all of the deductions on the grounds that the taxpayers did not individually operate a trade or business. The shareholders argued that the S corporation’s income or loss would pass through to them anyway, so it did not matter whether the expenses were deducted on their returns or were passed through by the corporation. The Tax Court disagreed with the shareholders. None of the expenses were allowable, even though they were legitimate and were incurred on behalf of the corporation. The corporation and its shareholders are separate and distinct entities, and one entity cannot take the deductions of another. Thus, neither the corporation nor the shareholders could deduct the expenditures. (The shareholders should, however, be entitled to increase stock basis for the expenditures made on behalf of the business.)
If the corporation had simply reimbursed the shareholders for the expenses, the corporation would be entitled to the deductions, and the expenses would pass through to the shareholders. If the reimbursements caused the corporation to be short of cash, the shareholders could lend the funds to the corporation. As an alternative, the corporation could pay the expenses directly, using funds borrowed from the shareholders. Such loans should be carefully documented and bear a fair market interest rate to avoid an IRS argument that they do not represent valid indebtedness. https://belkcollegeofbusiness.uncc.edu/haburton/acct-6130-taxation-of-pass-through-entities/
S Corporation Taxation by Robert W. Jamison
S Corporation Taxation Guide by Robert W. Jamison
A work-around: A shareholder is not entitled to a business deduction for the payment of expenses of a corporation that he or she controls. Rev. Rul. 71-36 which says pretty clearly: “…the sums advanced by him were expenses incurred in carrying on the business of the corporation, the business to which these expenses pertained was not the taxpayer’s business, but that of the corporation. Accordingly, the advances made by the taxpayer are not deductible in the years paid as ordinary and necessary business expenses under section 26 USC 162 of the Code.”
Instead, in order to obtain the tax deduction, the amount of the expense payments is reimbursed to the shareholder by the corporation or it is treated as a loan from the shareholder to the corporation (as long as the parties intended the payment to be treated as a loan and there is an obligation on the part of the corporation to make repayment). Edward Katzinger Co. v. Comr., 44 BTA 533, aff’d, 129 F.2d 74 (7th Cir. 1942). Otherwise, the payment is treated as a capital contribution. In either case, the shareholder has made the economic outlay required to increase basis. See Rose v. Comr., No. 07-12245 (11th Cir. 4/24/08) (Remanded to Tax Court on question whether shareholder’s payment of S corporation’s debt had economic substance where shareholder satisfied corporation’s debt by forgiving debt owed him by creditor of S corporation).
Regarding shareholder-employee transfers to the c-corporation – the taxpayer has the burden of proving that they were loans.
Tax court found that four major factors contradicted the company’s position:
- There was no written agreement or promissory note for the transferred funds;
- the shareholder did not charge interest;
- the company did not provide security for the loan; and
- there was no fixed repayment schedule.
The significant takeaway from this analysis is that for the transaction to be treated as a loan rather than a capital contribution, the terms of the transfer should reflect an unconditional obligation for repayment, rather than one that is entirely dependent on the company’s ability to repay. see Glass Blocks Unlimited, T.C. Memo. 2013-180
The Home Office Deduction for an active shareholder/employee of the s-corp apparently would be limited to a Schedule A deduction as an Employee Business Expense (and those are disallowed from 2018 through 2025).
If the s-corp happened to own the shareholder’s residence or a portion thereof, then the deduction for home office might be deducted on the Form 1120S itself, which in turn passes thru to the shareholder’s Schedule E.
If the shareholder owns the residence and if the s-corp were to pay rent to the shareholder, then IRC §280A(c)(6) denies most offsetting deductions.
IRC §280A(a) General rule
Except as otherwise provided in this section, in the case of a taxpayer who is an individual or an S corporation, no deduction otherwise allowable under this chapter shall be allowed with respect to the use of a dwelling unit which is used by the taxpayer during the taxable year as a residence.IRC §280A(c) Exceptions for certain business or rental use; limitation on deductions for such use
(1) Certain business use: Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis—
(A) as the principal place of business for any trade or business of the taxpayer,Interpretation: This means that unless the s-corp owns the residence or at least owns a portion of the residence, then the home office deduction is not allowable for a home owned by the shareholder.
IRC §280A(c)(3) Rental use
Subsection (a) shall not apply to any item which is attributable to the rental of the dwelling unit or portion thereof (determined after the application of subsection (e)).IRC §280A(c)(5) Limitation on deductions
In the case of a use described in paragraph (1), (2), or (4), and in the case of a use described in paragraph (3) where the dwelling unit is used by the taxpayer during the taxable year as a residence, the deductions allowed under this chapter for the taxable year by reason of being attributed to such use shall not exceed the excess of—IRC §280A(c)(6) Treatment of rental to employer
Paragraphs (1) and (3) shall not apply to any item which is attributable to the rental of the dwelling unit (or any portion thereof) by the taxpayer to his employer during any period in which the taxpayer uses the dwelling unit (or portion) in performing services as an employee of the employer.
Likewise, another viewpoint is that unreimbursed expenses incurred by S-corporation employee-shareholders generally are deductible as itemized deductions on Schedule A (and those are disallowed from 2018 through 2025) as long as the shareholder was paid a reasonable salary.
Therefore perhaps the best manner in which to claim the home office tax deduction requires the s-corp to require the shareholder/employee to make the space available for the convenience of the employer and then to actually pay a reimbursement to the shareholder/employee for the actual out-of-pocket costs incurred by the shareholder/employee in providing the home office space to the s-corp. Generally, §280A(c)(5) limits some of the home office deduction for the year to the taxable income from the related business enterprise. That currently non-deductible portion generally is deferred until the following year(s).
TAM 200121070 discusses Sec. 280A(c)(6). Under this provision, a taxpayer cannot take deductions for business expenses connected to rental income for a home office used exclusively for business as an employee at an employer’s convenience. A taxpayer may take mortgage interest, property tax and casualty loss deductions related to the home office, but cannot deduct additional expenses connected to the rental income, including business expenses, depreciation and business casualty losses.
Sec. 280A(c)(1) allows a taxpayer to deduct expenses allocated to the portion of a home used exclusively for business on a regular basis.
Sec. 280A(c)(3) allows the taxpayer to deduct expenses attributable to the portion of a home rented out. However, due to arm’s length rules Congress disallows business deductions for employees with home offices rented to their own employer.
Employees with home offices should avoid renting them to their employer, rather they should receive reimbursements for the costs of operating the home office.
see The Best Way to Claim a Home Office Tax Deduction for the Owner of a Corporation.
also see Rent an Office in Your Home to Your Corporation? Avoid This Big Mistake.
also see IRS Program Manager Technical Advice 00431, March 19, 2011.
Unreimbursed expenses
You can deduct unreimbursed ordinary and necessary expenses you paid on behalf of the partnership if you were required to pay these expenses under the partnership agreement. See the instructions for Schedule E, line 27 on page E-9 for how to report these expenses. http://www.irs.gov/pub/irs-pdf/i1040se.pdf
If a partner incurs out-of-pocket expenses in connection with providing services to a partnership, those expenses may be deductible on the partner’s individual tax return. To be deductible, the partnership agreement must state in writing that the partner pay the expenses. A partner’s out-of-pocket expenses are deducted on Schedule E (Form 1040), Part II, column (i). These expenses also reduce self-employment income on Schedule SE. The partnership may reimburse the partner for business expenses. However, if the partner has the right to be reimbursed, but fails to obtain reimbursement, the partner is not entitled to a deduction.
If the partnership’s agreement or practice requires a partner to pay certain partnership expenses from his own funds, with no right to reimbursement from the partnership, the partner is entitled to deduct these as trade or business expenses on his personal return. Because the partner is not an “employee,” the 2%-of-AGI limit of IRC Sec. 67(a) does not apply. (The deduction is still subject to other applicable limitations, such as the Section 274 limitation on the deductibility of travel and entertainment expenses.) If the partnership would honor a request for reimbursement, the expense is not deductible. While the “requirement” that the partner incur the expense without right of reimbursement need not be in writing, it is a question of fact, and may be the subject of IRS dispute. As a consequence, the partners will benefit by making this requirement explicit, either as a provision of their partnership agreement or through a written policy of the partnership.
(sample clause):
No Reimbursement For Partnership Expenses.
Each partner shall be required to incur those reasonable and necessary expenses as determined appropriate for the effective operation of the partnership, and such expenses will be made without reimbursement by the Partnership.
(sample clause):
Capital Contribution.
Each partner who pays a liability of the partnership upon submission of proof of such payment, will have made an indirect contribution to such partner’s capital account.
Note:
Unreimbursed payments of a partnership’s expenses by a partner should be treated as additional capital contribution to the partnership, and the partnership should be treated as having paid these expenses, pursuant to TAM 8442001.
In a private ruling that will affect CPAs in public practice as well as their clients, the IRS acknowledged a partner in a professional firm could deduct auto, travel and meal expenses on Form 1040 if the partnership policy requires the expenses to be incurred personally without reimbursement (technical advice memorandum 9316003).
The partner prevailed in this ruling because partnership practice required each partner to personally incur business expenses that could not be charged to clients (such as travel to fulfill continuing professional education requirements).
However, the partner was not permitted to deduct expenses reimbursable under partnership policy but for which he or she failed to seek reimbursement.
Observation: This ruling also clarified that business expenses incurred by the partner are allowed as Schedule E deductions and are not subject to the 2% miscellaneous itemized deduction threshold. This is consistent with both the 1040 schedule E instructions and previous IRS guidance allowing above-the-line treatment of interest expense incurred by a partner to acquire partnership ownership (see IRS notice 89-25).
The ruling may be of assistance to partners in several IRS districts where audit programs have asserted Form 2106 employee treatment for partner expenses (thereby forcing the deductions through the 2% miscellaneous itemized deduction
Reimbursements for Business Expenses paid by the owners of the business (sample clause):
Reimbursement For Partnership Expenses.
Each partner shall be entitled to reimbursement for the reasonable and necessary expenses incurred by the Partner on behalf of the Partnership. In order to receive reimbursement, a Partner must submit a written itemized report of all expenses for which reimbursement is sought, submit the expense report to the other Partners, and enter the expense report with the Partnership books and records. [CAUTION: when inserting this clause, no unreimbursed expenses made by a Partner generally will be allowed as a tax deduction on the Partner’s own Form 1040, Schedule E, Part II]
Reimbursement For S-Corporation Expenses.
The stockholders hereby authorize the president to establish, implement and modify a written accountable plan for payment or reimbursement of actual and necessary business expenses that are incurred or paid by an employee, officer, director or shareholder, subject to substantiation, pursuant to Internal Revenue Code Section 62(a)(2)(A) and Reg. Section 1.62-2.
- LLC Operating Agreement must satisfy basic requirements for economic effect (IRC Section 704(b) and Treasury Regulations Section 1.704-2(e)(1))
- In year that nonrecourse deductions first arise, allocations must be reasonably consistent with valid allocations of other LLC items (Treasury Regulation 1.704-2(e)(2))
- LLC Operating Agreement must contain “minimum charge back” provisions (Treasury Relations Sections 1.704-2(f)(c) and 1.704-2(e)(3))
- All other material allocations and capital account adjustments must be valid (IRC Sections 704(b)(c); Treasury Regulations Section 1.704-2(e)(4))
- Inclusion in Operating Agreement that:
- a) LLC will maintain capital accounts for its members in strict compliance with tax rules
- b) Partnership will make liquidating distributions in accordance with capital accounts
- c) Partners in liquidation who have deficits in their capital accounts will restore those deficits to the LLC
- d) LLC will make minimum charge backs with respect to their interest in LLC nonrecourse debt
Nominee accounts (sample clause):
The parties hereby agree that for the sake of administrative convenience and cost savings, and because [the entity name] has not yet secured its own accounts, [the entity] shall conduct trading activities in the personal account of [name of nominee] at [XYZ Brokerage account #123456].
[name of nominee] agrees to use said account 1) solely for the purpose of conducting trading activities for the account of [the entity] and 2) for charging certain expenses related to the business activities of [the entity] and 3) for depositing and withdrawing funds to or from [the entity]. Any such withdrawal of [the nominee’s] contributed funds shall not be considered a violation of this agreement, even if said funds are used for the personal business of [the nominee], whether or not transferred directly to third party vendors. However, [the nominee] shall not be permitted to use funds in said account to trade solely for his own account. Any purchase or sale of assets, futures, commodities, contracts or securities referenced above shall be for the account of [the entity], and profits and losses from such activity shall be shared among the parties hereto.
Liability / Asset Protection clauses: – corporations and limited liability companies offer different legal protections. For asset protection, you need to look at the choice of entity’s “inside liability” and “outside liability.” Inside liability protects non-entity assets from liability that is directly and solely related to the business and not at all due to the negligence, mistake, oversight or the responsibility of the individual himself. Outside liability protects entity assets from liability that is directly and solely related to the individual and not at all due to the negligence, mistake, oversight or the responsibility of the business.
Examples of inside liability include: employee driving company vehicle causes an accident; a product sold by the company causes harm to the purchaser; lease-rental or bank loan signed by the company with no personal guarantee made by the individual, corporate bankruptcy.
Examples of outside liability include: a trip and fall in the home; a lawsuit resulting from an automobile accident with the family car while on personal errands; a judgment resulting from a personal guarantee; personal bankruptcy.
A creditor of the individual can seek an order by the court to have shares of stock in the corporation turned over to the creditor. Once this is done the individual has lost his investment in the company. But if the business was held in a limited liability company, then in many cases in order to protect the interests of any innocent LLC members with a new unwanted member (the creditor) the court will not order to turn over the ownership of the LLC to the creditor, rather a charging order is issued. The charging order assigns any future profit distributions and any distributions that are a return of capital. The creditor may even have to accept a K-1 from the LLC and pay the income taxes on any annual earnings of the business – but receive no cash from which to pay the income taxes with. Conversely, the other LLC members might be paid a GPP, providing them with ample cash with which to pay their income taxes.
The LLC needs to have more than one owner-member, otherwise the court may be more likely to side with the creditor since there is no innocent LLC members to be protected. The LLC operating agreement needs to be drafted or reviewed by an experienced asset protection lawyer so it will contain language for:
- assignee/member definitions
- assignee limitations
- no right of members to demand distributions
- prohibition of transfer of member interests
- involuntary transfer poison pill provisions
- no partition allowed
- accurate voting thresholds
- allocation of profits and losses
§761(c) PARTNERSHIP AGREEMENT. – For purposes of this subchapter, a partnership agreement includes any modifications of the partnership agreement made prior to, or at, the time prescribed by law for the filing of the partnership return for the taxable year (not including extensions) which are agreed to by all the partners, or which are adopted in such other manner as may be provided by the partnership agreement.
In other words long after-the-fact or retroactive provisions in a partnership agreements are not allowable. All items must be in the verbal or written partnership agreement or otherwise adopted no later than the initial due date of the tax return. This is basically a trap for the unwary. For example: upon being audited, if it was found that the unreimbursed expenses clause or agreement was missing, inconsistently applied or otherwise defective in some way, it is too late to “fix it” once the IRS agent points if out to you. Once caught in this type of trap, “your goose is cooked.”
How a partnership agreement helps your business
Legal
If you and your partners don’t spell out your rights and responsibilities in a written partnership agreement, you’ll be ill-equipped to settle conflicts when they arise, and minor misunderstandings may erupt into full-blown disputes.
In addition, without a written agreement saying otherwise, your state’s law will control many aspects of your business.
A partnership agreement allows you to structure your relationship with your partners in a way that suits your business. You and your partners can establish the shares of profits (or losses) each partner will take, the responsibilities of each partner, what will happen to the business if a partner leaves and other important guidelines.
The Uniform Partnership Act
Each state (with the exception of Louisiana) has its own laws governing partnerships, contained in what’s usually called “The Uniform Partnership Act” or “The Revised Uniform Partnership Act” — or, sometimes, the “UPA” or the “Revised UPA.” These statutes establish the basic legal rules that apply to partnerships and will control many aspects of your partnership’s life unless you set out different rules in a written partnership agreement.
Don’t be tempted to leave the terms of your partnership up to these state laws. Because they were designed as one-size-fits-all fallback rules, they may not be helpful in your particular situation. It’s much better to put your agreement into a document that specifically sets out the points you and your partners have agreed on.
What to include in your partnership agreement
Here’s a list of the major areas that most partnership agreements cover. You and your partners-to-be should consider these issues before you put the terms in writing:
- Name of the partnership. One of the first things you must do is agree on a name for your partnership. You can use your own last names, such as Smith & Wesson, or you can adopt and register a fictitious business name, such as Westside Home Repairs. If you choose a fictitious name, you must make sure that the name isn’t already in use
- Contributions to the partnership. It’s critical that you and your partners work out and record who’s going to contribute cash, property or services to the business before it opens — and what ownership percentage each partner will have. Disagreements over contributions have doomed many promising businesses.
- Allocation of profits, losses and draws. Will profits and losses be allocated in proportion to a partner’s percentage interest in the business? And will each partner be entitled to a regular draw (a withdrawal of allocated profits from the business) or will all profits be distributed at the end of each year? You and your partners may have different ideas about how the money should be divided up and distributed, and each of you will have different financial needs, so this is an area to which you should pay particular attention.
- Partners’ authority. Without an agreement to the contrary, any partner can bind the partnership without the consent of the other partners. If you want one or all of the partners to obtain the others’ consent before binding the partnership, you must make this clear in your partnership agreement.
- Partnership decision making. Although there’s no magic formula or language for divvying up decisions among partners, you’ll head off a lot of trouble if you try to work it out beforehand. You may, for example, want to require a unanimous vote of all the partners for every business decision. Or if that leaves you feeling fettered, you can require a unanimous vote for major decisions and allow individual partners to make minor decisions on their own. In that case, your partnership agreement will have to describe what constitutes a major or minor decision. You should carefully think through issues like these when setting up the decision-making process for your business.
- Management duties. You might not want to make ironclad rules about every management detail, but you’d be wise to work out some guidelines in advance. For example, who will keep the books? Who will deal with customers? Supervise employees? Negotiate with suppliers? Think through the management needs of your partnership and be sure you’ve got everything covered.
- Admitting new partners. Eventually, you may want to expand the business and bring in new partners. Agreeing on a procedure for admitting new partners will make your lives a lot easier when this issue comes up.
- Withdrawal or death of a partner. At least as important as the rules for admitting new partners to the business are the rules for handling the departure of an owner. You should set up a reasonable buyout scheme in your partnership agreement.
- Resolving disputes. If you and your partners become deadlocked on an issue, do you want to go straight to court? It might benefit everyone involved if your partnership agreement provides for alternative dispute resolution, such as mediation or arbitration.
As you can see, there are many issues to consider before you and your partners open for business – and you shouldn’t wait for a conflict to arise before hammering out some sound rules and procedures. A good self-help book, such as “The Partnership Book” by attorneys Denis Clifford and Ralph E. Warner (Nolo), can help you think through the details and put them in writing.