Promotion to partner

[Alwaysblue]

Happy new year! It’s that time of the year now when firms (big and small) make announcement for those that were promoted to partners.
 

I was wondering if recent years there has been a trend of moving towards more income partners v. equity partners?  

Anyone have info /rumours/ gossip willing to share? 

[C_Terror]

Pretty easy to check if you have time to do some digging. Just go on linked in and see each big firm's latest partnership class and stalk them. If they're partners at  years 5/6 or even 7 now, they're likely income partnerships and that firm has a 2 tier partnership, and can do the calculations that way.

If the new partners are years 8/9/10, then they're almost always equity partners and likely means the firm has only equity partners. 

[Alwaysblue]

Thanks! How would you know if a firm has two tiers?
 

Do you think if a 7th year is promoted to partner it would be income partner still?

 

[Rashabon]

5 minutes ago, Alwaysblue said:

Thanks! How would you know if a firm has two tiers?
 

Do you think if a 7th year is promoted to partner it would be income partner still?

 

 

1 hour ago, C_Terror said:

Pretty easy to check if you have time to do some digging. Just go on linked in and see each big firm's latest partnership class and stalk them. If they're partners at  years 5/6 or even 7 now, they're likely income partnerships and that firm has a 2 tier partnership, and can do the calculations that way.

If the new partners are years 8/9/10, then they're almost always equity partners and likely means the firm has only equity partners. 

 

[Cool_name]

If we are talking partnership, does anyone have rumours about what buy-in typically looks like? 

[Lawstudents20202020]

Anywhere from nothing to a lot

[Alwaysblue]

Even for income partners? (I assume all partners are required to buy in). 

Back in the days I think 7th year is the standard for equity partnership (not even sure if income partners are a thing or just started to be a thing).
 

Never heard 5/6 year being income partners even now I think?

Why so many income partners now?

[LMP]

If you're buying in aren't you inherently an equity partner by virtue of having purchased equity? Or do you mean purchasing a book of business or something? 

[Rashabon]

Income partners tend to have a fixed draw and do not pay a buy-in. Equity partners will buy-in an their draw will fluctuate depending on partner profits. Income partnership is increasingly common in the last decade or so, with many firms now having an income partnership tier either as a prelude to equity partnership or permanently if a partner isn't invited to buy-in.

Davies has always made income partners after like year 4 or 5 because that was part of their shtick. Certain other firms might also do so, but you tend to see certain firms make income partners after year 7 or so. Torys is still all or mostly equity partners, and Stikeman might be as well but I can't remember. I think Osler might be mostly or only equity as well.

[Cool_name]

2 hours ago, Lawstudents20202020 said:

Anywhere from nothing to a lot

I know what counts as nothing, but what counts as a lot? 2x expected income as a partner? 
 

I heard it’s 500k at Pearson Specter Litt, or whatever they are calling themselves now

[Lawstudents20202020]

What is the value of a human soul.

But seriously, I have no idea. I have a feeling that it's something you can afford if you are in a position where you are being asked to pay it. I've heard plenty of (usually very good) reasons as to why people declined being a partner, the buy in has never been mentioned. 

[Jaggers]

They arrange a loan, so it's part of your cash flow rather than an up front payment.

[Bob Jones]

On 1/4/2024 at 7:20 PM, Cool_name said:

If we are talking partnership, does anyone have rumours about what buy-in typically looks like? 

I don't think it works that way in Canada

[Rashabon]

41 minutes ago, Bob Jones said:

I don't think it works that way in Canada

? What do you think equity partnership is?

[Pantalaimon]

I think some firms used to make you buy in to income partnership...

[Cool_name]

2 hours ago, Bob Jones said:

I don't think it works that way in Canada

I’m a bit vague on the amount, but I know for sure there is a buy in (I’m sure there are some small firms which are the exception). 

[Bob Jones]

17 hours ago, Rashabon said:

? What do you think equity partnership is?

? I’m aware what equity partnership is, but I always appreciate the passive aggressive retort. 

Edited January 10, 2024 by Bob Jones

[BlockedQuebecois]

8 minutes ago, Bob Jones said:

I’m aware what equity partnership is

Putting aside the fact that you're a chicken for not sticking with your original retort, your post above actually makes it quite clear you don't know what equity partnership is. 

[Dinsdale]

Equity partnership is just that, equity.  As in something you invest money in and own.  Generally speaking, the buy-in is financed by a loan.  Income partnership does not require a buy-in at any firm I have been involved with or have knowledge of, because it is really just glorified associate-ship with perhaps some upside potential from exceeding personal billing targets, but not a split of the firm's overall profits.

As an aside, if an equity partner leaves a firm, the firm is generally required to repay the departing partner's equity. If several partners decide to leave, this can lead to a "run on the bank" type situation, and in rare cases (Heenans, Goodman & Carr) can lead to the total demise of established, reputable firms.

[Jaggers]

Or, much more recently, Minden Gross.

[switchdog]

1 hour ago, Dinsdale said:

Equity partnership is just that, equity.  As in something you invest money in and own.  Generally speaking, the buy-in is financed by a loan.

Debt Partnership. 

[Cool_name]

To be fair, equity partnership refers to ownership, there is nothing in principle preventing a firm from admitting an equity partner without requiring a buy in. 
 

If you are valuable enough, firms will pay you to join their partnership (don’t count on this as your retirement plan).

[Alwaysblue]

7 hours ago, Dinsdale said:

Equity partnership is just that, equity.  As in something you invest money in and own.  Generally speaking, the buy-in is financed by a loan.  Income partnership does not require a buy-in at any firm I have been involved with or have knowledge of, because it is really just glorified associate-ship with perhaps some upside potential from exceeding personal billing targets, but not a split of the firm's overall profits.

As an aside, if an equity partner leaves a firm, the firm is generally required to repay the departing partner's equity. If several partners decide to leave, this can lead to a "run on the bank" type situation, and in rare cases (Heenans, Goodman & Carr) can lead to the total demise of established, reputable firms.

Yea I have never understood what’s the point of income partnership then? I assume they hold some sort of partnership units and can have some sort of voting power? It’s like doing probation for the eventual equity partnership? 

Anyone know or have any gossip/rumours/knowledge about what happened to Minden gross? Sounds like some partners left without much notice but why? One was a pretty prominent tax partner? But they are not really known for tax - more for like corp and commercial leasing it seems.

[C_Terror]

3 hours ago, Alwaysblue said:

Yea I have never understood what’s the point of income partnership then? I assume they hold some sort of partnership units and can have some sort of voting power? It’s like doing probation for the eventual equity partnership?

Anyone know or have any gossip/rumours/knowledge about what happened to Minden gross? Sounds like some partners left without much notice but why? One was a pretty prominent tax partner? But they are not really known for tax - more for like corp and commercial leasing it seems.

The way they made income partner seem like in my firm is more of a "promotion", and marketability. It's one thing to be an Associate from first year of call until your ninth, but another to be "promoted" to an income partner at year 5/6 etc, even though you're still the same as a glorified senior associate in an equity only firm. The fact you're just called "partner" in these firms means that nobody can really tell if you're an income or equity partner etiher.  

It can also provide better optics/justificiation for charging higher billable rates to clients. 

It's becoming more and more popular over the years; just look down south where KE came in and upended the legal business, and now you see elite white shoe firms like Cravath bending the knee to create an income partner tier. It's much more profitable for the firm and you retain valuable talent longer. I won't be surprised if all the big law firms in Toronto follow suit within the next 5-10 years.

[switchdog]

12 hours ago, Alwaysblue said:

Yea I have never understood what’s the point of income partnership then? I assume they hold some sort of partnership units and can have some sort of voting power? It’s like doing probation for the eventual equity partnership? 
 

You get access to more information as well (particularly financial information). It is like trying out partnership without the financial commitment, so a probation kind of like you said for both sides.