Are You Sure You Want To Be A Law Firm Partner?
You may be at a point in your legal career where you are considering whether to pursue partnership at your law firm. And there are lots of reasons you may decide to aim for that goal: you like, and are skilled at, representing clients in private practice; you want to continue doing so at your law firm, but in a more senior and independent role; you believe you have the ability to develop business; and you value the prestige and financial compensation of being a partner. Law firm partnership can be a tremendously rewarding step in your career. But before you decide that you want – or think you should want to be a partner – consider looking carefully at whether that is the right move for you.
Assess the financial implications of partnership
As a newly-minted partner, you may not make as much money as you thought you would. For example, if your firm offers an income partnership path, you will be a salaried employee and will have a regular income, but you won’t receive a share of the firm’s profits at the end of each year. Your salary as an income partner may also not be substantially more than you were paid as an associate or counsel. Pressure to meet industry benchmarks for associate bonuses and to lure lateral hires to the firm can also reduce the monies available or reserved for bonuses or growth in income partner salaries.
Even as a recently elected equity partner, depending on your firm’s financial model (e.g., lockstep, modified lockstep, eat-what-you-kill, etc.), and how much business you can generate in your first few years of partnership, you may not make the big dollars you anticipated. You will have increased costs that impact your financial picture. This starts when you pay more for things like health insurance because partners bear a greater share of that expense than do non-partners and other employees of the firm. Furthermore, equity partners generally are expected to spend some of their own money on business development, without all of it being reimbursed by their firm. Plus, making a capital contribution – your buy-in to an equity stake in the firm – is something you will have to budget for, even if you are able to finance that obligation along with making payments on any law school debts that you have remaining. And if times get tough at the firm, there can be a risk of a capital call, which is what happens when that equity partners make further payments to the partnership (beyond the already paid-in equity) to cover the firm’s obligations to meet expenses such as salaries, real estate, taxes, and debt payments.
Evaluate whether your firm is a good fit for you
The firm that has been a good place for you to succeed as a non-partner attorney is not always the best place for you as a partner. Getting good work and good opportunities as a talented associate or counsel might have been easy for you, but developing your own business and generating value for the firm could be harder as a partner. For instance, the business development efforts you envision are for potential clients for which you didn’t realize pose a conflict with existing firm clients; clients that another partner in the firm already “claims” for their own credit and won’t share; or your business plan is inconsistent with your firm’s overall priorities for the types of industries or clients that it wants to represent.
In addition, if you’re expecting as a junior partner, at least initially, to get most of your work from other partners who have needed your help on their matters in the past, make sure you understand whether that is realistic. Other partners may be under pressure from their clients to leverage lawyers with a lower billing rate than a partner. A senior associate with much the same experience and capability as you may be easier to justify on the bills. Some firms do have more opportunities for service partners, particularly if your path to partnership has included working closely with a rainmaker partner who has a large book of business that can support another partner and keep them fully occupied on billable work. It’s important, therefore, to understand what your firm may expect in terms of the number of years it allows for a new partner to build their own client base versus adding value as part of an existing team.
Understand your firm’s management model
You may be wondering who makes some of these decisions such as when a capital call is issued and how credit is allocated for clients. The answer depends on how your firm operates. The firm partnership agreement will outline some of that information, but as a non-partner you probably won’t have access to that document. There are also many informal ways in which law firms handle business decisions, or delegate them to the firm’s chair or managing partners for resolution. To get more information, you might consider asking a partner you know well to describe for you the general parameters of how the partnership operates and explain who makes some of the key decisions that you are concerned about.
Many larger firms operate with an experienced, non-lawyer chief financial officer, albeit one who works in consultation with equity partners, or at least the firm’s management committee or chair. Other firms, particularly smaller ones, may work differently, including with one or two partners making decisions for the firm. How transparent a law firm is with its partners, and how significant issues are raised and addressed, indicates how much confidence it has in creating a true partnership. When partners feel that they have a voice in how their law firm operates, they usually have more faith in how the firm is being managed.
Be realistic about the work required of partners
If you think being a partner means having non-partner lawyers and other legal professionals finally available to you so you can hand off the time-consuming, non-billable, and at times even tedious work required in private practice, think again. In addition to their billable requirements, partners need to devote a lot time to administrative work for their clients, including reviewing and correcting bills, managing the costs incurred on matters, and developing and negotiating terms for fee agreements. There is also a plethora of firm-related administrative work, including managing employees, doing evaluations, and working to collect on fees. Being available as a mentor or advisor to junior attorneys, engaging with your local bar association or other legal community group, and serving in various committee and leadership roles at your firm also requires your time.
All of these undertakings - plus your billable work and efforts spent doing business development -- mean that you are spending your days devoted heavily to professional life. While that may be what you want to be doing at this stage of your career, you also may have personal, family, and community priorities. Be honest with yourself about how you want to spend your days, as well as your nights and weekends. As a partner, you are an owner and a manager in a business. That means there are instances in which you may have to respond to a client or firm emergency/urgency – even when you are on vacation or at an important family event, for example. As a non-partner, you may have worked exceptionally hard but as a partner you have greater business responsibilities.
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Partnership in a law firm is not what everyone may want or find rewarding. If you are contemplating seeking election as a partner in your firm, start by asking yourself what it means to be a partner in your law firm, and how that role matches with what you want professionally.
If I can assist you in working towards change in your professional life, exploring opportunities, and making progress towards your goals, or you have questions about how I might work with you, please contact me at laura@lauraterrell.com