What are the types of partnership in a law firm?

Jan 05, 2023

Written By Yi Kang Choo

Considered the pinnacle of most solicitors’ careers, partners are commonly the group of senior lawyers who run their law firms, and those who are responsible for winning clients or working for their teams. Whilst you might have heard of the term ‘partner’, have you ever wondered what the different types of partnerships in a law firm are?

Equity-based Partnerships – Lockstep Model

One of the most common types of partnership within the legal profession is the lockstep model, where the proportion of profits is being shared amongst equity partners depending on their seniority in the firm. This suggests that the longer someone has worked in a firm, the higher amount of money/compensation will be paid to them, as compared to their junior peers.

This can also correlate with the typical ‘single-tier’ approach, where partners are being promoted from senior lawyers if they have spent a certain number of years at the specific firm. Even though such a strict model provides certainty and clarity for its lawyers in terms of partner/career progression, it might oversee valuable incentives such as the financial performance and experience of a lawyer, especially since they are no longer being paid or promoted based on merit.

Merit based pay

The merit-based model is seen more often at US firms. Instead of basing partner profits on their seniority, this model rewards those who make the most money for the firm. The concept of ‘merit-based’ pay has been quite popular in the legal profession, where associates and partners are being further incentivised (financially) to increase their performances and to win more clients for their firms.

While this is a good way to incentivise lawyers, some have argued that this model results in competitiveness and harms the firm's collaborative culture.

Modified and hybrid lockstep approach

That is why most of the top law firms in the city, including some of the magic circle firms like Linklaters, are implementing a modified lockstep/merit based model, where partners are being appointed and paid not entirely based on the ‘years’ they spent in the firm. Profits are calculated considering both a lawyer’s seniority and how much money they’ve earned for the firm.

Such a flexible partnership model is also a great opportunity for law firms to integrate their values and mission within the promotion/recruiting criteria for partners. Existing partners can also rely on these criteria to determine whether they will still be a good fit for the firm, or to consider how they would like to strategise their work moving forward.

Different levels of seniority

Depending on the size of the firm, the titles of partners (and actual power) might differ. For example, in smaller firms, or even a ‘solo firm’ that is being run by a single partner, it will be more common to see a ‘monarch structure’ of partnership.

This means that a single or fairly small number of partners dictates the firm's direction and management, especially since they might be the sole generator of business. They usually set their own rates, and make decisions about the firms all by themselves.

In larger or international firms, it might also be common to see partners with different seniority/titles, such as having a senior partner and managing partner. They typically work under a clear hierarchical structure – with the managing partners sitting at the top of the leadership hierarchy. They are also usually the ones who take on a management role and set key operational or directional strategies in the firm, on top of their legal practice.

Non-Equity Partnership – Two-Tier model

Whilst being an equity partner could be a lucrative role, there are also multiple burdens that one will need to bear, especially being directly responsible for the growth and development of the firm’s business as one of its ‘owners’. This might not be an ideal model for all partners, and that’s why some partners are actually non-equity partners, where they are compensated by a fixed salary as opposed to a share of the firm’s profits.

This is what we usually call a ‘two-tier’ partnership model (with equity and non-equity partners). Non-equity partners do not have to buy-in to the firm, and will not possess an ownership stake in the firm. However, some firms may confer limited voting rights to their non-equity partners, but this largely depends on the structure and constitutions of the respective law firms.

No ‘One size fits all’ partnership model

As demonstrated in this article, there really isn’t any ‘one size fits all’ approach when it comes to determining the partnership models in a firm. Multiple factors such as the size, the culture, the profitability, the regulations, and the structure of a firm might eventually contribute to its final partnership structure. Whilst all are being called a ‘partner’, there are indeed many types of partnerships within the legal profession.

Law Firm Structure