What is the difference between a “Partner”, “Executive Partner”, and “Managing Partner” in a law firm?

Law firms can be organized in a variety of ways. You can be a solo-practitioner and work alone or you can have a team of lawyers working as partners.

If you’re thinking about creating a partnership, there are many types of partnerships to choose from.

In this article, let’s examine the benefits and ky features of a law firm partner, law firm executive partner and a law firm managing partner.

What Does “Making Partner” Mean?

First, let’s take a look at the meaning of “making partner.”

If you haven’t started your own law firm and you are not already a partner, you may likely be considered as an employee or associate for a law firm. In this position, you wouldn’t have ownership of the law firm but you would be permitted to practice law.

Starting as an associate or an employee of a law firm is a great way for fresh graduates and inexperienced lawyers to learn the ropes and become acquainted with the world of law. Your time will be spent training and you won’t be providing any “billable” hours.

When you’re ready to make the transition into a partnership, this is when you’ll earn a higher salary, become a partial owner of the firm, take on greater responsibilities and liabilities, and also receive a portion of the firm’s profits.

The structure of any partnership will vary depending on how it is incorporated and you can learn more about that in Starting A Law Firm.

Law Firm Partner

Joining a starting your own law firm or joining as a partner will immediately place more work, responsibility and liability on your career. The skills and experiences you acquired as an associate can now be put into practice at a high frequency and a much greater pay bracket.

In regards to compensation, partners can be paid in a variety of ways. You may receive a salary or receive a more common method of withdrawal from a pool of profits. Other methods can include earnings that are based entirely on the clients you secured and provided legal services for yourself.

When becoming a partner for a law firm you will receive a well-written contractual agreement outlining all the terms and conditions of your partnership. Inside this contract may be things like:

• Required capital contributions
• Amount of profit a partner can draw and how often each receive it
• Salary and payment schedule
• Penalties for leaving the partnership
• Partnership authority
• Clauses defining death and disability
• Procedures to resolve disputes between partners
• Descriptions of roles, responsibilities, and accounting information

Law firm partnerships requires delicate consideration, strategic negotiations, and careful decision making. Think of joining a partnership as getting married for a certain period of time. You’ll want to know exactly who you are going to be partnered with, how they operate, what they believe in and most importantly the “marriage” rules that will influence your practice for years to come.

If joining a partnership is in your best interest, you may want to consider becoming an executive partner or a managing partner at a law firm.

Law Firm Executive Partner

As an executive partner at a law firm, you’ll take on many a distinct role in leadership and take on many of the major decisions that affect the fate and future or a law firm.

Executive partner’s require extensive insight which will support the growth of the law firm’s objectives and goals.

The responsibilities of an executive director include the overall management strategy, financial management, social accountability, workplace compliance, etc. The executive partner will be dedicated toward preserving and promoting the way the firm practices law and makes critical decisions regarding. The scope of work focuses primarily on short and long term operational decision. In comparison, a managing partner will be dedicated  toward high level management decisions and strategic issues.

Executive partners take on most of the administrative duties in the firm to ensure that operations run smoothly. They also perform functions in accordance to the principles and rules the firm has in place. The executive partner will often be elected from a committee managing partners and other high positioned investors in the law firm.

If you’re being considered as an executive partner of a law firm or seeking this position, the overall success of the firm will be entirely up to you.

Law Firm Managing Partner

Before becoming an executive partner at a law firm, it may be in your best interest to become a managing partner.

Managing partners for a law firm are responsible for the overall operations of the firm. This includes delegating responsibilities to attorneys, secretaries, firm executives, paralegals and other employees at the firm.

Managing partners, much like executive partners, can be responsible for developing the strategies and defining the goals for the long-term success of the law firm.

Decisions regarding the cases the law firm will take on and which clients the firm will represent is one of the roles of a managing partner. They will also be required to ensure compliance with professional standards while following government laws and regulations.

Here’s a detailed list of skills required from a managing partner:

• Financial planning and strategy
• Legal compliance
• Client relations
• Decision making
• Strong verbal communication
• Strong written communication
• Delegating tasks
• Improving operations and processes
• Legal website design
• Profitability management

Becoming a managing partner takes you away from the legal caseloads and into the back-end operations of the law firm. The workload is significantly greater and the responsibilities differ than a partner at a law firm.

To summarize the job description of a managing partner, they focus on the relationship side of the law firm and how to effective serve their clients.

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.