Yes, tiny violin - did anyone else struggle first years of law partnership?

[Anonymous]

Anonymous wrote:No advice PP. But curious this is the norm at AmLaw 100 firms? Esp the overhead? I had no idea.

Idk. Again, feeling pretty naive about the whole thing.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No advice PP. But curious this is the norm at AmLaw 100 firms? Esp the overhead? I had no idea.

Idk. Again, feeling pretty naive about the whole thing.

I don't blame you! Seems like a bait and switch. Did you not ask about take home pay during the recruitment?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No advice PP. But curious this is the norm at AmLaw 100 firms? Esp the overhead? I had no idea.

Idk. Again, feeling pretty naive about the whole thing.

I don't blame you! Seems like a bait and switch. Did you not ask about take home pay during the recruitment?

Recruited as of counsel with quick track.

[Anonymous]

Anonymous wrote:No advice PP. But curious this is the norm at AmLaw 100 firms? Esp the overhead? I had no idea.

I’m the confused poster, and no the “overhead” charge isn’t typical. I mean all firms have overhead obviously, but it’s considered an expense and deducted from gross income BEFORE arriving at profits per partner.

Clearly OP’s firm is inflating their numbers to look better. Incredible

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No advice PP. But curious this is the norm at AmLaw 100 firms? Esp the overhead? I had no idea.

Idk. Again, feeling pretty naive about the whole thing.

I don't blame you! Seems like a bait and switch. Did you not ask about take home pay during the recruitment?

Recruited as of counsel with quick track.

Are you taking home less than you were as of counsel?

[Anonymous]

[img]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No advice PP. But curious this is the norm at AmLaw 100 firms? Esp the overhead? I had no idea.

Idk. Again, feeling pretty naive about the whole thing.

I don't blame you! Seems like a bait and switch. Did you not ask about take home pay during the recruitment?

Recruited as of counsel with quick track.

Are you taking home less than you were as of counsel?

Yes.

[Anonymous]

I’m the previous “confused” poster. When I first read OP’s post I assumed that by overhead she meant capital contribution. If you switch those words in her OP then, yea, that’s exactly how most equity partners are compensated in Biglaw. The difference is that the capital contribution refunded to you when you retired or leave the firm. So it’s almost like a forced savings. You pay taxes on it the year you make the contribution, but when you get it back you don’t.

Example: I was an equity partner in a big DC firm for about a decade, retiring early quite a while ago. I was paid almost exactly what OP’s spouse is now. But it was an honest $800k with the capital contribution taken out - none of this “overhead” BS. Then when I left the firm the money was returned to me. It was about $700k from what I can remember, and because I had already paid taxes on all of it before it wasn’t taxed again. A nice chunk of cash to ease the path to early retirement.

[Anonymous]

PP here. Wow lots of typos sorry. Hit sent before proofing.

[Anonymous]

[img]

Anonymous wrote:I’m the previous “confused” poster. When I first read OP’s post I assumed that by overhead she meant capital contribution. If you switch those words in her OP then, yea, that’s exactly how most equity partners are compensated in Biglaw. The difference is that the capital contribution refunded to you when you retired or leave the firm. So it’s almost like a forced savings. You pay taxes on it the year you make the contribution, but when you get it back you don’t.

Example: I was an equity partner in a big DC firm for about a decade, retiring early quite a while ago. I was paid almost exactly what OP’s spouse is now. But it was an honest $800k with the capital contribution taken out - none of this “overhead” BS. Then when I left the firm the money was returned to me. It was about $700k from what I can remember, and because I had already paid taxes on all of it before it wasn’t taxed again. A nice chunk of cash to ease the path to early retirement.

So how was your pay structured? Did you get a monthly payment and what was it?

[Anonymous]

DH was in a very similar position except that while he was a mid-level associate, a young partner clued in DH. Basically, we saved a ton to try to stay ahead of the buyin, capital calls, deferred comp, quarterly taxes, etc. Sounds like OP started spending money and expanding lifestyle/expenses without calculating the future financial situation. Just how most others do it too. Still, a problem of your own making.

[Anonymous]

Anonymous wrote:This is an equity partnership at top 50. All partners start at $800k. Retirement is around $70k, overhead around $130k. Monthly payout is around $20k. Draws about 55k, three times a year. Then end payout. Tax bills for quarterly payments about $80k, fed and state. That’s the gist of it.

NP but even though the money is uneven you're getting 4 x $55K = $220K + $20K x 12 = $240K for a total of $460K per year gross right? Don't you have savings from when you are an associate? Why don't you just use that money to smooth out the lumps and then replenish your savings when you get your draws during the year and at the end of the year?

[Anonymous]

Anonymous wrote:DH was in a very similar position except that while he was a mid-level associate, a young partner clued in DH. Basically, we saved a ton to try to stay ahead of the buyin, capital calls, deferred comp, quarterly taxes, etc. Sounds like OP started spending money and expanding lifestyle/expenses without calculating the future financial situation. Just how most others do it too. Still, a problem of your own making.

Oh, massive eye roll, lady. We bought a house. And sent a kid to school. Get over giving yourself gold stars for handling your husbands income so well.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is an equity partnership at top 50. All partners start at $800k. Retirement is around $70k, overhead around $130k. Monthly payout is around $20k. Draws about 55k, three times a year. Then end payout. Tax bills for quarterly payments about $80k, fed and state. That’s the gist of it.

NP but even though the money is uneven you're getting 4 x $55K = $220K + $20K x 12 = $240K for a total of $460K per year gross right? Don't you have savings from when you are an associate? Why don't you just use that money to smooth out the lumps and then replenish your savings when you get your draws during the year and at the end of the year?

We have to make quarterly tax payments from this also. It’s three times $55k, the final number isn’t settled yet, but the tax bill at the end of the year will be much higher.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is an equity partnership at top 50. All partners start at $800k. Retirement is around $70k, overhead around $130k. Monthly payout is around $20k. Draws about 55k, three times a year. Then end payout. Tax bills for quarterly payments about $80k, fed and state. That’s the gist of it.

NP but even though the money is uneven you're getting 4 x $55K = $220K + $20K x 12 = $240K for a total of $460K per year gross right? Don't you have savings from when you are an associate? Why don't you just use that money to smooth out the lumps and then replenish your savings when you get your draws during the year and at the end of the year?

We have to make quarterly tax payments from this also. It’s three times $55k, the final number isn’t settled yet, but the tax bill at the end of the year will be much higher.

Got it, but the final number won't be 0 right? I mean, you can probably safely assume it will be $40K right? Also, you're paying taxes on $460K + 130K capital contribution so total taxable income will be $590K even though your actual gross is only $460K. I think your estimated tax payments are incorrect as $80K per quarter implies an effective tax rate of over 50% ($320K tax payments vs. $590K gross).

[Anonymous]

Anonymous wrote:[img]

Anonymous wrote:I’m the previous “confused” poster. When I first read OP’s post I assumed that by overhead she meant capital contribution. If you switch those words in her OP then, yea, that’s exactly how most equity partners are compensated in Biglaw. The difference is that the capital contribution refunded to you when you retired or leave the firm. So it’s almost like a forced savings. You pay taxes on it the year you make the contribution, but when you get it back you don’t.

Example: I was an equity partner in a big DC firm for about a decade, retiring early quite a while ago. I was paid almost exactly what OP’s spouse is now. But it was an honest $800k with the capital contribution taken out - none of this “overhead” BS. Then when I left the firm the money was returned to me. It was about $700k from what I can remember, and because I had already paid taxes on all of it before it wasn’t taxed again. A nice chunk of cash to ease the path to early retirement.

So how was your pay structured? Did you get a monthly payment and what was it?

I can’t remember the exact numbers and of course they fluctuated by year, but I seem to recall that the firm would estimate what the partner’s compensation would be for the upcoming year, divide that by around 2, then divide that by 12 to come up with a monthly draw. So for 800 you divide by 2 to 400, then divide that by 12 for a monthly draw of 33k. Health insurance premiums, social security, etc would then be deducted from the monthly draw. Then you’d get a couple of extra draws for estimated taxes around estimated tax time.

At the end of the year you’d basically get a statement that says ok, here’s your actual pay for the year. We’ve already paid you X, so you’re still owed Y. From Y we are now deducting your capital contribution and taxes that are paid on behalf of all partners, etc, which leave you with Z.

On rare occasions there was a deficit, but usually I’d end up with a check in five to (very low) six figures at the end of the year - just in time for another tax bill.