In addition to bringing in business, partners also have an obligation to provide oversight and guidance for associates. This can include supervising junior law firm partners and mentoring new hires.
In most cases, a law firm partner will receive an annual salary and benefits similar to that of senior associates. They may also be eligible for profit sharing and a bonus.
Equity Partners
Becoming an equity partner at a law firm is more than just a career milestone. It’s a major investment that can pay off handsomely in the form of high-dollar compensation and a big piece of the firm’s profits. However, becoming an equity partner requires a great deal of work and dedication. It’s also not for everyone.
Generally, only the highest-achieving associates will be asked to become an equity partner at a law firm. This is a good thing, as it allows the firm to carefully consider the merits of each potential new partner. However, it can be a difficult pill to swallow for those who feel they’ve been passed over for partnership too many times.
One of the biggest challenges of being an equity partner is the substantial financial commitment required to be a part owner of a law firm. In most cases, the firm will request a large one-time contribution (known as a buy in) to purchase an ownership share of the business. This can easily run into the six figures. Coupled with the recurring cost of health insurance, becoming an equity partner at a top law firm can be an expensive endeavor for most lawyers.
The other challenge is that, once a lawyer becomes an equity partner, it can be very difficult to generate enough business to offset the firm’s operating expenses and profit margin. Many partners struggle with this, and some even end up leaving the firm due to this problem. The good news is that there are strategies to help mitigate this issue. One way to do this is to focus on the firm’s key client relationships and retaining them over time, which will increase the firm’s revenue and overall profitability.
Law firms also encourage their equity partners to develop their own book of business. In fact, some law firms even offer a stipend or bonus for developing business outside of the firm. However, it’s important to note that most law school courses do not prepare graduates for working in a law firm partnership. As a result, many attorneys find themselves in a situation where they’re spending more of their time fighting for a bigger slice of the pie than actually developing business.
In most cases, being an equity partner at a law firm comes with the added benefit of prestige and a good tax deduction. It’s a reward for years of hard work and dedication to the firm. And, if the firm does well, the equity partner’s personal bank account will do very nicely as well.
In most cases, becoming a non-equity partner at a law firm is a long and winding road that will require a substantial amount of hard work to accomplish. Most firms will employ a “junior partner” structure that allows non-equity partners to work towards being equity partners over time. Non-equity partners earn a salary, similar to what associates are paid, and do not receive a piece of the law firm’s profits. However, they do have the right to be consulted on firm matters and will be given billable rate increases.
