Lawyers & Partnership Agreements

When you decide to become a lawyer, you’re entering a field where hard, diligent work might not always result in profits. You’re often at the mercy of judges and juries when you attempt to win verdicts for your clients. A perfectly good case can tank due to intangibles you have little control over. Your client may refuse to pay you. Given that measure of uncertainty, many lawyers opt for partnerships rather than take the risk entirely on their own shoulders as sole practitioners.

Governing Laws

Some laws governing partnerships vary from state to state and others are federal. All are basically in place as defaults, resorted to in disputes when a firm does not bother to draft a partnership agreement or overlooks the inclusion of an important clause. For example, under the Uniform Partnership Act, your law firm dissolves if you enter into a partnership agreement with another lawyer and she unexpectedly dies. However, you can override this by stating otherwise in your agreement.

Allocating Income

Depending on what field of law you and your partners practice, your financial contributions to the firm may vary. For example, if you take fees on a contingency basis when you settle a personal injury lawsuit, you would make large contributions at extended intervals. These cases take longer to resolve. If you specialize in criminal law and take on a lot of DWI cases, your clients probably pay upfront. These cases usually resolve relatively quickly and you move on to the next. Your partnership agreement should address this. You will need to determine if all fees are to go directly into the firm’s management account and if you will each draw off that account weekly or monthly for your own compensation, regardless of the pace of your contributions.

Decision Making

If you have just one partner, management decisions can either be easy or very difficult. If you agree, your decision is unanimous, but if you disagree, you’re at a stalemate. You should add provisions for this into your partnership agreement, even if it comes down to the equivalent of a coin toss. This situation doesn’t occur as often in multi-member firms, but your partnership agreement should address how you're going to address votes on both small issues and larger ones. For issues such as adding an additional partner or taking on a controversial case, firms usually require a supermajority vote. For example, if your firm has three or four partners, you might decide to require a unanimous decision. If your firm is larger, you might require a 60, 70 or 80 percent majority vote, depending on the impact the decision might have on the firm.

Finer Points

If you neglect to address all potential issues in your partnership agreement, overlooked topics might eventually turn into big problems. Include provisions in the event one of you is disbarred and can’t practice or contribute to the firm, either temporarily or permanently. Consider if one of you is going to be in charge of personnel and daily operations and if he will receive additional compensation for these duties. This partner is usually called the managing partner and has more voting impact in decision-making. If you decide to promote a young, hardworking associate to partner, determine if the appointment is a gift or if he has to buy his way in to compensate existing partners for their sweat equity — all the work they put into getting the firm off the ground.


About the Author

Beverly Bird has been writing professionally since 1983. She is the author of several novels including the bestselling "Comes the Rain" and "With Every Breath." Bird also has extensive experience as a paralegal, primarily in the areas of divorce and family law, bankruptcy and estate law. She covers many legal topics in her articles.