Law Firm Partnership Track & Management

RJH Consulting

By: Krystal Champlin

Law Firm Partner: Equity Partner vs. Non-Equity Partner
In “traditional” old-line law firms, it was typical for a lawyer to join a firm upon graduation from law school. From there on work hard as an associate for five to seven years. And then, in most cases, be admitted as a law firm partner. As an equity partner, he/she stayed with the law firm until death or retirement.

Many smaller firms today have made the business decision to limit the number of equity partnerships. Instead, small law firms offer non-equity partnerships to associates that they would like to keep. It is indeed a common practice these days to have at least two tiers of partnership.

An equity partner shares directly in the profits of the firm. Equity partnership involves:
  • shared liability for the debts of the firm
  • voting rights regarding the affairs and strategy of the firm
  • compensation based on a share of the profits
  • financial investment in the capital of the firm

Non-Equity Partner
A non-equity partner does have a direct share in the profits of the firm. However, the benefits entail:
  • attend meetings of partners
  • access to more information than non-partners
  • a partner designation which can be deemed important in terms of prestige & marketing
Non-equity partners play an important role in a law firm. Thus, it is imperative to differentiate a non-equity partner from an associate.

The contributions of the non-equity partners should be recognized not just by giving them an overall bonus. At RJH Consulting, we recommend and have designed profit sharing arrangements that are based upon the individual’s profitability to the firm.

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