When you’re law career begins, you may find yourself working at a law firm as an associate and provided with a base salary. Transitioning from employee to becoming a partner at a firm is a great leap.
The path from associate to partner at a law firm may not always be clearly defined. However, there are a few criteria that can assist you if you’re being considered or have been offered to become a partner at a law firm.
The Path to a Partner at a Law Firm
Firms hiring lawyers often choose the best they can find. Applicants from top law schools are recruited first with interviews being limited to specific schools only.
There is a chance of distinguishing yourself in another way, however, most candidates for law firm positions will be considered by pre-selected schools.
Upon hire, your career often starts as an associate. You will be working with a mentor to learn how to practice law. At this time, you will be paid a relatively high salary as the law firm is investing in you at their firm.
While law firms seek to find the best potential lawyers, not all make partner at their firm. Some may leave to start their own private practice or start a firm of their own after a few years with the firm. The path to becoming a partner can be long and take now take over ten years before it occurs.
Partner vs. Non-Partner
On becoming a partner at a law firm, you not only take on more responsibility but also receive an equity stake in the firm’s profits. This provides you access to draw profits to cover your bills and monthly expenses. At the end of the year, you’ll be able to take a larger share when profits are distributed.
This is the typical style of partnership, however, there is also the possibility of becoming a non-partner which does not give you an equity stake in the law firm. Law firms have been adopting varying styles of multi-tiered partnerships which provide increases in salaries (and responsibilities) instead of receiving a small percentage of the firm.
In some cases, law firms may have different types of partnerships available. For example, you can be able to become an executive or managing partner.
There are many factors that influence the structure of a law firm and how it establishes available partnerships. Depending on the size and growth of a firm, offering a non-partnership promotion may be more financially secure than offering equity stakes. Law firms can be an LLC or a corporation and their level of success can determine how much access to equity their rising associates may receive.
Cost of Making Partner
Becoming a partner may not come cheap. Law firms that offer a partnership with an equity stake will often ask for a “buy-in.” That amount varies for each firm, however, some of the top firm’s may require hundreds of thousands of dollars as a capital investment.
Law school is already an expensive investment and many lawyers take years to pay back their loans. If you’re one of the few being fast-tracked to a partnership, consider the capital that may be needed to partner-up.
The “base” capital investment is not the only expected cost new lawyers are expected to cover. Becoming partner means you will be responsible for the costs of benefits and additional income tax deductions.
Finally, some associates moving into a position of being a full-fledged lawyer may experience a shift in lifestyle. This too can come with a heavy price tag.
Putting the financial situation into perspective, law firms don’t want to see their selected partners making less than senior associates. Partners are carefully groomed into their position and law firm’s take precautions to choose them carefully.
Why “Buy-in” to a Partnership?
The capital required to “buy-in” to a partnership position is needed to make investments and expansions at the law firm. You may not have to contribute the full amount as some law firms allow for a contribution that is spread out over a couple years.
Firms may offer a loan structure which secures the capital while imposing a debt onto the partner. However, other firm’s may opt out of requesting “buy-in” capital to avoid paying out a partner who decides to leave after the first few years. Another approach may be to delay the required capital investment by a year so that new partners can develop their services and get into the flow of their new career.
Benefits to Becoming a Partner at a Law Firm
After years of law school and enduring the high-stress legal world as an associate, becoming a partner adds the following benefits to a career in law:
- Increased pay
- Equity stake in the law firm
- Greater prestige and power
Disadvantages to Becoming a Partner at a Law Firm
While the increased pay and access to the firm’s profits may seem like a lucrative leap in your career, here’s a few things that may be disadvantageous:
- May take years to the firm before being considered a partner
- Greater liability (i.e. sued for malpractice or if the law firm goes bankrupt)
- Must pay additional fees: medical insurance, malpractice insurance, etc.
- Required capital “Buy-in”
- Consequences for not keeping the firm profitable
If becoming a partner at a firm is not your interest, you may want to consider starting your own law firm.