Best Practice: Law firm owner adding a partner
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the sole owner of a law firm in Tucson, Arizona. I have seven associates working for the firm. I have one very senior level associate that I want to consider for partnership. I want to do this to keep him interested (he has been approached by other firms) and I envision him being a cornerstone of my succession plan - 10 years out. How should I start the process with him?
A. It sounds like you have found the person - or whom you believe is the right person for partnership. However, just because he has been a good associate does not mean that he will be a good partner - the relationship will be different. But at least he is somewhat of a known quantity since you know him and have worked with him for several years.
Here are a few ideas of where you might start:
- Outline you goals and expectations for the relationship.
- Meet with your associate and identify his goals and expectations for the relationship.
- Determine how much control over the practice and decision-making are you willing to give up? Share?
- Determine how much and for how long you are willing to make less?
- Determine if the associate will be expected to bring in business? When/Timeline?
- Think about the firm you want to build - firm-first or lone ranger (team based or individual practices)?
- Decide on firm name - will it change? Should it? Impact on image, clients, etc.
- Decision as to capital contribution or buy-in? Yes or No? How much? Timeline for payment?
- Ownership percentages
- Voting
- Compensation
- Withdrawal arrangements
Once you can come to terms with some of the above issues craft a suitable partnership or operating agreement that you can both live with.
Good luck!
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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.