If you own a law firm - whether as an overburdened solo practitioner or a firm lacking legal expertise in a particular area - bringing on a new partner may weigh heavily on your mind. Not only will there be a merger of legal practices, but there also will be a combination of finances, business acumen and respective reputations.
As such, it’s important to be prudent in your consideration—a wrong choice could lead to dissolution or worse, akin to an eventual divorce in a bad marriage.
Knowing what lies ahead when combining a potential partner’s law practice with yours can help to abate any turmoil down the road.
Here are 5 questions to consider when contemplating the decision to add a name to the sign that hangs outside your office:
- Do you have similar work style?
This might seem trivial, but it’s crucial that you and your future law partner work well together on a daily basis.
- Do you keep the same office hours?
- Do you have similar views on work-life balance?
- Do you share the same vision on hiring and managing staff, offering benefits and fostering company culture?
You and your potential partner will spend a lot of time together—sometimes it may even feel like they’re an extension of your family given the hours you may spend in tandem. Resentment can creep up easily, so selecting someone who shares your views on the workplace and its operation can go a long way to create a harmonious partnership.
- What type of law do you want to practice?
The legal industry is diverse and some areas of law compliment each other better than others. It’s fundamental to the success of your firm that you and your future law partner work in complementary practice areas. For example, a divorce attorney entering into practice with a patent attorney may not be the most practical union unless you can find some synergies between the two.
In addition, some level of overlapping knowledge between you and your prospective partner in your firm’s area of expertise can create a competitive advantage. As C.S. Lewis once said, “two heads are better than one.”
- How will your reputation be impacted?
In the legal field, your reputation is your brand. Once tarnished, it can be difficult (and sometimes impossible) to bounce back. When selecting someone to enter into business with, be sure that you follow a similar ethical compass.
As you’re likely aware, ethics opinions issued by each state bar association can vary. Thus, it’s important that not only do both you and your partner have a full understanding of your professional responsibilities, but also an appreciation of how they will ultimately impact your practice.
- Do you want to give up equity?
Running a law firm is expensive and trying cases to their full resolution can put an enormous amount of stress on a firm.
A couple of significant benefits to bringing a partner into your law practice is that they often will make a capital contribution in exchange for equity, and they can share some of the financial burden with you of running a practice.
Strategize how you plan to fund your firm and its initiatives. Will your partner contribute personal wealth for the betterment of the business? Will you seek out a funding source and will your partner be willing to co-sign?
Knowing where you stand and what level of financial commitment each party is willing to contribute is imperative to a successful partnership.
Lastly, the execution of a partnership agreement is imperative. It is crucial to spell out in good times, how to handle the bad. Anyone who has been through a divorce knows exactly what is meant here. The partnership agreement should cover all areas of management, staffing, financing and delegation of responsibilities so that there is no dispute later on.
- Will you increase your network?
The blending of professional networks can be a huge win when forming a joint venture. Access to your new partner’s community of fellow lawyers, co-counsel, vendors, experts and other professionals—and vice versa—is likely to open up new opportunities for your firm. You can take advantage of these relationships, which have already been built and nurtured, to build your firm, your client base and your resource pool. However, not every potential partner will have a network advantageous to your business.
There are numerous factors that play into the success of a business new venture. Adding a partner is no exception. Taking a close look at what is most important to you and the advancement of your firm can help you recognize what factors should be of highest consideration. Planning ahead and being honest with yourself about what will work for you—and what might not—can help abate problems down the road and set you up for the best outcome.