Dream of Being a Law Firm Partner? There’s Something You Should Know

Many lawyers begin their careers specifically with the goal of being a law firm partner. Some lawyers decide later that they’d like to find a law firm that offers an associate position on the partnership track. Growing up, television shows and movies made us fall in love with the idea of being a law firm partner. And, truth be told, we all recognize that there’s a lot of time, work, blood, sweat, and tears put into becoming a partner. It’s called a partnership track. The word “track” implies the long haul. The real question is, do you know what’s waiting for you at the other end? And does it matter to you if it ends up not being everything you hoped and dreamed it would be?

If You Make Partner at a Law Firm

You’ve worked for it. You can see it. It’s just around the bend. The big talk is coming. It’s so close you can taste it. Soon, you’ll make partner at the law firm. You’ll be an equal. You’ll have associates. You’ll be part of the “in” crowd….right? Well, maybe. It depends on how the law firm partnership structure works. Hopefully, you’ve already had the big talk with the partnership committee long before you’ve dedicated (or sacrificed, depending on how you look at it and feel about it) all of your talent and time. But, that’s not always the case. Then again, you could be just starting law school and still dreaming of being a law firm partner and wondering what it’s like to earn partnership.

Law firm partnership structure is broken down into two types:

1. Equity
2. Non-equity

Equity law firm partnerships are the partnerships at law firms we all dream about and see on television and in the movies. The beautiful and the elite lifestyle that we all dream about and think that we deserve after dedicating (or sacrificing) our time, effort, and talent for all of those years. Equity partners generally buy-in (including sweat equity if you can’t actually invest money into the law firm) to the firm at some point and share in the profits of the firm. There are differing types of agreements for equity law firm partnerships:

• Lockstep partnerships. Senior partners in the law firm receive more profits than newer equity partners.
• Eat what you kill. Each partner gets a certain amount of the firm’s profits as well as payment for their own contributions toward the growth of the firm.

While equity partners in a law firm share in the profits, they also share in the losses and liabilities. Of course, the extent to which each partner would be required to invest capital into the law firm, cover losses, and be responsible for various liabilities would be (or should be) documented within the partnership agreement.

A non-equity partner is another type of law firm partner. They get the title, but they do not share in the profits. Meaning, they don’t make as much money as an equity partner. They usually work more, too. On the plus side, they also aren’t responsible for the losses or liabilities of the law firm. It could be salaried or a percentage of business originated. Sure, there could be performance bonuses, but again, there won’t be a share in the profits since it is a non-equity partnership.

Equity or Non-Equity Law Firm Partnership: Does It Really Matter to You?

Working toward law firm partnership isn’t for everyone. Honestly, that’s okay. It really is okay. Is making law firm partner important to you? Is it your ultimate goal? If your answer is yes, that’s great! Now it’s time to answer the next question. Is it necessary for you to be an equity partner? Are you okay with being a non-equity partner? Does it really mater which?

If you’re not sure whether you want to be an equity or non-equity law firm partner yet, that’s fine, too. Let’s discuss some of the finer points of each.

Equity law firm partnership. Equity law firm partnership can certainly mean a lavish lifestyle, but it isn’t readily available. It could require a buy-in either through an initial capital investment (and future capital requirements) or through sweat equity. You’ll be eligible for profit sharing, but you’ll also be liable for losses suffered by the firm as well as firm liabilities, depending on the partnership agreement is structured. Everything depends on how the partnership agreement is written. For example, your management power will be defined by the partnership agreement as well. The more seniority a partner has, the higher percentage they may receive of the profit. You may make more money if you bring in more of your own business or if your associates bring in more business.

Non-equity law firm partnership. You’re a law firm partner, but it’s primarily in name only. Depending on the law firm, you may be able to become an equity partner in the future. As a non-equity partner, you do not share in the profits. You also do not share in the losses. You do not have to buy-in. You do not have any sort of direct management power (although you may have associates who report to you, but you won’t be a shareholder). You’re compensation could have a salary, or draw, component, or it may be solely based on the amount of business you bring into the firm.

Does it really matter to you which type of partner you become? Think about this. The general public won’t know the difference between an equity and a non-equity law firm partner. And they won’t ask. Those who know that a law firm may have both types of partners probably won’t bother to ask; at least, they won’t ask in public. They probably won’t ask in private, either. The only exception to that may be a law student or a licensed legal intern who is seeking information about their own future and is looking to make connections and trying to learn about the differences for their own information.

It’s Your Decision and That’s Okay