In prior parts of this series, I wrote about the advantages and disadvantages of becoming an equity partner in a law firm. In order to complete the picture, I really should address the fantasy of a non-equity partner (“NEP”) as well.
Some years ago, law firms decided that they were not profitable enough to continue to admit new equity partners after six or seven years. However, many associates still considered partnership to be the Holy Grail. In order to keep them somewhat content, law firms had to produce a modern equivalent to the bread and circuses that the Romans used to distract their citizens centuries ago.
Whatever you think of lawyers, you have to give them credit for being creative. And so, the NEP was born. You would think that the concept would have been dead on arrival since the definition of partnership requires that people carry on business with a view to a profit, and a NEP neither carries on a business, nor strives to earn the profits of a business. Instead, they are salaried or commissioned employees or contractors.
However, firms needed to provide associates with a distraction, and giving them them the title “partner” and celebrating their achievement served the purpose well. Law firms were able to delay full equity partnership for many more years, thus preserving the incomes of the real partners.
From this humble beginning, many variations of fake partners have been developed. There are now “associate partners,” “tax partners,” “income partners,” and even “salaried partners.” None of these people are actually partners, although all of them are presented, somewhat dishonestly, to clients as being partners. They are also presented to the income tax department as being partners, and frankly, I have no idea why the income tax department puts up with it.
It may be that there are valid business and professional reasons to delay offering equity partnership to lawyers far beyond the six or seven year period that was traditional when I started practicing so many years ago, although I have my doubts. I am pretty sure that the only reason is to avoid having more people drinking from the compensation pool.
All of the forgoing is provided as background to the point that I would like to offer for consideration to lawyers who are offered the opportunity to become a NEP. If non-equity partnership is a stage in your firm’s partnership policy through which you must pass in order to become an equity partner, it may make sense for you to accept that.
It may also make sense for you to accept a NEP if you have no interest in ever becoming an equity partner.
However, if equity partnership is your goal, realize that becoming a NEP is simply not real partnership, nor is it a guarantee that it will get you to equity partnership. Don’t allow the bread and circuses being offered by your overlords to distract you from your goals.
A version of this article was originally published by Law360 Canada, part of LexisNexis Canada Inc.