©Gentile & Associates

PARTNERSHIP OPTIONS FOR THE SMALL FIRM

The small firm practitioner only eats if she succeeds.  If you are currently solo and the hunt has been lean, or if you are ready to start your practice and the thought of hunting alone seems daunting, look for a partner. 

Choosing the Right Partners

While it goes without saying that you should like and respect your partner, you should not be identical twins.  The real issue is: what can he bring to the table?  You need a partner who can compliment your strengths, not replicate them.  If you like details, get a partner who sees the big picture.  If you are a rainmaker, but weak on follow-through, partner with the nerd who makes sure that you have a prima facie case when you go to trial, the deadlines are met and the checks don’t bounce.  Find a Ginger to your Fred, or a Watson to your Sherlock Holmes¹.

 Bear in mind, however, that today’s strengths can be tomorrow’s weaknesses.  Consider the potential negative side to your prospective partner’s admirable traits.  You may like his aggressive litigation style, but over time, will you feel he’s nagging, pushy and annoying instead of assertive, attentive and focused?  Alternately, will her relaxed manner that you find soothing now seem more like lethargy when the days are long and the struggles are hard?  Keep in mind how much time you will spend working with each other, and just how much space there is between your offices.  Make sure that you can both be flexible enough to respect the other’s point of view when you need to make decisions together (even if you don’t agree).

The Partnership Agreement

It is important to have a partnership agreement.  The agreement is the plan that will   organize the firm, prevent disagreements by confirming arrangements before there is a “situation” and will determine how to split the bounty if there is a breakup.  To draft a partnership agreement, educate yourself about the standard terms of a law partnership agreement (the ABA and NYSTBA have publications on the topic), draft the terms of the agreement that reflect the specific goals and priorities of your unique partnership, and have it reviewed by an attorney with experience in this area.  

The exercise of negotiating and drafting the agreement can teach volumes before you ever sign it.  As you go through the process, be sure that the strengths you bring to the partnership are properly acknowledged and compensated.   It is important that your prospective partner hears your position and responds appropriately.  If your contribution is not recognized during the courtship, it will only get worse.  If your partner is thickheaded and obstinate now, that will not change before the age of retirement.  You may reasonably choose to enter the agreement anyway, but plan a strategy to deal with such issues. 

The agreement is a blueprint for success.  You can use it to set policy, determine the decision making process of the firm and set the compensation schedule.  The agreement determines who gets to vote on what, and whether anybody gets two votes.  Depending on the issue, consensus, simple majority or unanimous agreement may be appropriate.   As for compensation, in some practices, the attorney who brings in the business gets extra compensation.  That rewards the rainmaker over everyone else, although all are integral to the successful firm.  You may decide to prioritize rainmaking over the other areas, or that may be the only way you can convince the rainmaker to partner with you.  Or, you may conclude that parity of all the critical areas of the firm is required and divvy the rewards up evenly.  You are setting policy - think through all the logical consequences of the priorities you determine. 

Your partnership agreement must include an exit strategy.  This is your best and perhaps only opportunity to create terms of separation that will not wreak havoc.  Be as explicit and detailed as possible.  Decide how difficult or easy you want it to be to terminate one partner’s share, or dissolve the partnership.   Set the specific procedures for termination, dissolution and division of assets and liabilities of the firm.

In addition, “think of the children”.  The greatest source of disagreement when a partnership ends is who gets the business.  Create a clear process that prevents unseemly campaigns to woo clients during the break up.  Decide now whether the business will belong entirely to the partner who brought in the case, whether there shall be no financial recognition of the origination of the case, or if the arrangement shall include some but not total allocation to the partner who was the source of the business.  Of course, a client is always free to select her own attorney, but you can reach an agreement that there will be no competition and you can allocate fee arrangements up front. 

To avoid litigation, decide the potentially explosive issue of case allocation while you are friends and before any breakup is in the air.  Think of it as a professional “pre-nup” to protect the interests of all parties.  The idea of your “pre-nup” is to avoid messy conflicts and ensure that you can part amicably.  And, like the kids in a divorce, you must first think of what’s good for your clients; that is your ethical obligation. 

Under the same nuptial model, only speak well of your partner in front of your clients and to the community.  Include a non-disparagement clause in your partnership agreement and stick to it.  Never speak poorly of your former partner in public.  Never.   Only complain about your partner to those who have a legal obligation to keep your confidences.   This is the right and fair way to behave; in addition, it will enhance your professional image and will reassure your clients and colleagues. 

If things don’t work out, a partnership breakup can be more painful and more costly than divorce.  If a break up occurs, you will truly learn how well you have selected your partner.  Always treat your partner with the same respect and good will as you did when you were forming the partnership. 

Partnering Well

Partners owe each other fiduciary loyalty and personal loyalty.  One well-respected founder of a leading firm surprised those who had gathered at a City Hall event to honor him at the end of his career, when his only acknowledgement was to his long deceased law partner.  Without commenting on any omissions from the list, the recognition in this instance demonstrated that loyalty is cherished and rewarded.

Your partner will share the burden of courting clients, paying bills, and dodging both (for just an hour while you catch your breath).   A good partnership will enhance your lawyering skills, reduce your stress, increase the value of your practice, and give you whiter teeth.  It is powerful to know that when your flood of paperwork does not settle the case, your partner can pick up the file and try the case without blinking an eye.  Your partner knows that she can call in and you will quickly find just the case law she needs to convince the judge that the evidence is admissible, or that her closing statement does not warrant a mistrial.   

Keep in mind that the skills needed to run a successful firm fall into three broad categories: rainmaking, inside work and outside work.  Rainmaking is based on success, or the appearance thereof.  One way or another, you get hired because someone is convinced they will do well with you as their attorney, and both “inside” and “outside” attorneys can be good rainmakers.   Inside work generally includes office management, case management and strength as the “law guy”.  Outside work includes trying cases, and networking with the community, the bar, and the bench. 

It is unusual for one person to excel in all three areas.  In fact, the skills and talents required in one area tend to preclude those of another.  The personality noted for swashbuckling charm, excessive confidence and absence of any fear of public failure that is well suited to trying cases may well be made queasy by the challenge of hitting the books to draft a detailed and nuanced legal argument that the “law guy” breezes through.  And the contemplative, organized “inside” attorney (who knows the location of every document in the office) often has no stomach for the kind of robust schmoozing that accompanies networking. 

There are some attorneys who are so talented that they can compensate for their weaknesses in some areas without anyone noticing, and do well without a partner.  Other attorneys are so ornery that they have no choice; they work alone because no one will have them.  For everyone else, partnership is a good strategy and may be our evolutionary destiny, since we lost our sharp teeth and fast feet in favor of a sharp mind and an opposable thumb to shake hands.

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