As a law student or recent graduate, you are likely considering the different types of legal careers and partnerships.
You might be wondering what to expect in each type of partnership and how they work. This is understandable!
There are quite a few different partnership structures in law firms, which can make it tough to choose the right one for you.
This guide will outline the various types of law firm partnerships, including equity partnerships and non-equity partnerships. It will also cover what each type of law firm partnership is like and how they are structured.
We will walk you through the steps to becoming a partner at a top-tier law firm by explaining that not all partnerships are created equal!
1. How To Know What Is the Best Path for You?
One of the most important decisions a law firm partner can make is how to structure their partnership. The way a partnership is structured will have major consequences for its partners and any new hires.
There are several different ways partnerships can be structured, but each has its pros and cons. Regardless of which one you decide on, you must understand what you’re getting into before signing any contracts.
For those of you considering a career in law, it is important to know all the various available partnership structures and how they each might affect your prospects.
A lucrative and prestigious legal career awaits law school graduates who successfully find a firm that suits their needs best.
Some firms operate on an equity partnership structure, wherein all partners share equally in profit and liability (i.e., “equity partners”). Other firms have a salary partner system, where no shares of profits or liability are allocated to associates.
Still, some offer a mix of both models. Which is best? Well, that depends on what you’re looking for!
For example: If you’re more interested in prestige over paychecks, then look for an equity partnership; if you want to climb the ladder and become a partner quickly, then go with a salary partner system; and if you want to be able to enjoy the fruits of your labor as soon as possible, then choose a mixed system that offers both forms of compensation.
For example, a good personal injury lawyer that was made partner might earn a percentage of a solved case on top of having shares in a company or on top of a fixed salary.
It all depends on the firm and yourself. You need to make sure what your goals are and negotiate the best solution for yourself when applying for a job!
2. The Attorney Path to Partnership
Many factors go into becoming a partner at a law firm, with the most important being your performance. Part of your performance is based on the number of hours you bill and what types of cases you take.
Once you have established yourself as an attorney, then it becomes more about the relationships you build with others in the firm. The best way to build these relationships is to participate in events outside of work, such as social events or charity work.
There is no set timeline for when a law student might be offered a partnership in a law firm, but it can take up to 10 years or more to achieve this status.
3. How the Partner Path Works
The partner path is a long one, and it is not always clear how you will be evaluated on your way there. Some law firms have formalized paths, while others do not. However, the most common type of partner path for top-tier firms is the Cravath Model.
Every year, standards are set for each new class of associates at Cravath. Associates are assigned to various levels based on their work performance and reviewed by partners in their class.
Associates who excel in their positions will be offered a promotion to the next level–senior associate–before they are eligible to take the written test (the Cravath exam).
After passing this exam, they become junior partners and must stay in that position for a minimum of two years before they can take another exam (the Cravath oral exam) to become partners.
When you become a partner in a law firm, you’re typically given either a silent or active partnership. The difference between the two is that an active partner will still be able to practice law, while a silent partner has retired from practicing and is now just an investor in the law firm.
Silent partnerships are often given as employment benefits to partners who choose not to practice anymore.
Other partnership structures exist, like a profit-sharing or junior partner. A profit-sharing partner has the same responsibilities as an active partner, but they are not given any voting rights.
The junior partner is just starting and will have to earn their rights in the law firm by working hard and gaining more experience.
The junior partner is typically given a lower equity share than the other partners in the law firm.
4. The Benefits of Being a Partner at a Top Tier Law Firm
Becoming a partner at a top-tier law firm is an attractive proposition for many up-and-coming attorneys.
The benefits of being a partner at a top-tier law firm include achieving independence, having more autonomy over your work, and earning more money.
In an equity partnership, you are an actual owner of the company. You are entitled to profits from the company as well as some say in how it operates. You can choose which clients to take, or which cases to let go of if you feel that they might hurt your firm in the long run.
In non-equity partnerships, you are not considered an owner, but you still have the same level of autonomy and control over your practice as if you were an equity partner.
5. Different Types of Law Firm Partnerships
There are several different types of law firms and partnerships. The first thing you should know is that there are two types of partnership structures: equity and non-equity partnerships.
Equity partners have ownership in the company, while non-equity partners do not.
6. The Equity Partnership
An equity partnership is a type of partnership where the partners receive a financial interest in the law firm. This means that each partner has an equal share of the profits and losses in return for their investment.
Equity partnerships are also known as “50-50” partnerships because each partner receives one share or 50% of the profits.
To become an equity partner at a top-tier law firm, you need to have four years of experience in the relevant field of law (this differs based on state), achieve an above-average score on the bar exam, and demonstrate success with clients and cases.
Equity partners are responsible for generating new business and bringing in new clients, which can be challenging.
Equal partners work together in a full-time capacity to generate new business and increase their market share. They also split any profit generated by the firm evenly.
One thing to keep in mind is that most equity partnerships require you to spend around 40 hours per week at the office, while non-equity partnerships typically allow you more flexibility with your time.
If you are looking to be more involved in the management of a business, equity partnerships might be for you.
Equity partnerships seek to create an ownership stake for employees who have contributed heavily to an organization’s success. As an equity partner, you may have an equal say with other partners or even managerial roles depending on the firm.
There are three types of equity partnerships: general equity partner, limited equity partner, and limited liability partner.
7. The Non-Equity Partnership
The non-equity partnership is one of the most common types of law firm partnerships.
Not all firms have this type of partnership, but many do. This type of partnership does not involve sharing the profit or losses of the firm with other partners, and it is a great option for those who want to keep their professional and financial lives separate.
The partner has full control over his/her billable hours but may not be able to grow their services as quickly as if they were an equity partner.
Non-equity partnerships are good for people who want to maintain full control over their hours and workloads but do not want to share in any profits or losses.
Non-equity partnerships offer less responsibility than equity partnerships but greater benefits than pipeline partnerships. With this type of partnership, you will have responsibilities but no ownership stake in the company.
This type of agreement is ideal for those who want to grow their clientele without worrying about the day-to-day operations of the company but still reap some benefits like profit sharing and bonuses!
There are also two types of non-equity partnerships: profit-sharing partners and salaried partners. Each type has its benefits, so it’s important to understand all your options before making a decision.
8. The Pipeline Partnership
The third option is pipeline partnership. These partnerships offer a clear path for new hires to become partners.
Pipeline partnerships are straightforward, with a set timeline for making partners, with agreements in place about responsibilities, potential bonuses, and other nuances.
Navigating the partner track can be tough. However, once you find the right practice area and develop the necessary skills and expertise, you’ll be in a position to make a run for partnership. It’s a long and difficult journey.
But if you’re committed to the process and take your time, you’ll be rewarded with the prestige of being a partner at a top-tier law firm.