what is the typical equity partner buy-in (at law firms of various sizes) and how is that financed?

[Anonymous]

Anonymous wrote:At DH's firm the buy in is $100K every year. We went on my health insurance but he still makes less net than before he made partner. The health insurance would have been something like $30K a year.

Lots of new partners at his firm have had to take out loans, especially if their spouses didn't have a high wage job. We're lucky that I have a good job but it has still been a negative change from a cash flow perspective.

100k every year in perpetuity? this may be a stupid question, but why did your hubby buy in, if he is making less money? is there large potential upside in the future?

[Anonymous]

So what's the upside of all of this? Seems like a scam and a way for firms to shed cost of benefits.

[Anonymous]

Anonymous wrote:So what's the upside of all of this? Seems like a scam and a way for firms to shed cost of benefits.

That makes no sense. The partners are owners of the business. If they pay benefits at the firm level then the partners get paid less as there is less profit to distribute. Basically it's a wash. And partnerships can't pay partner benefits.

[Anonymous]

Anonymous wrote:So what's the upside of all of this? Seems like a scam and a way for firms to shed cost of benefits.

Generally you're gaining equity in the firm as well as substantial retirement benefits, so even if you take a slight drop in take home pay, it is easily offset by your rapidly-increasing net worth. (And, of course, if you end up being one of the top earning partners you make millions of dollars per year)

[Anonymous]

Not to derail the thread but is this all under wraps until you actually become partner? Are you told any of this beforehand or is it just generally understood that you'll just accept the set-up when you get called up for partner?

[Anonymous]

I'm a fairly senior associate and my firm does not tell me this stuff. I'd imagine they would if/when I were very close to making partner. But they certainly don't tell me a few years in advance. (That being said , my informal merits have told me much of this at lunches and such)

[Anonymous]

There are other things too-- like you have to have a certain amt of life insurance.

I don't think they told you any of the details until they offered you partnership, but even I as a jr associate knew not to expect a pay raise as a new partner.

[Anonymous]

So how the heck do partners end up rich? My FIL was a senior partner at a biglaw firm, he's retired and worth MILLIONS.

[Anonymous]

1. Most partners are rich by just about any measure. Even if their salary does not immediately skyrocket upon making partner, the salary increases over time , and their net worth quickly rises.

2. The average partner draw is well over a million at the bigger firms. So certainly some partners are making tons. Just not brand new ones.

3. Partner salaries used to be more lock step, meaning that regardless of whether our FIL was a rainmaker or just an average partner, he was probably making around the same amount as his other partners. Now they are less lockstep. One partner might never make much more than half a million a year, while another at the same firm pulls in 12 million. Hey're bith doing quite well, but the spread is much larger.

[Anonymous]

Anonymous wrote:1. Most partners are rich by just about any measure. Even if their salary does not immediately skyrocket upon making partner, the salary increases over time , and their net worth quickly rises.

2. The average partner draw is well over a million at the bigger firms. So certainly some partners are making tons. Just not brand new ones.

3. Partner salaries used to be more lock step, meaning that regardless of whether our FIL was a rainmaker or just an average partner, he was probably making around the same amount as his other partners. Now they are less lockstep. One partner might never make much more than half a million a year, while another at the same firm pulls in 12 million. Hey're bith doing quite well, but the spread is much larger.

Thanks. I don't dare ask that type of question to my FIL.

He's quite intimidating. Clerked for a chief justice and never slowed down.

[Anonymous]

$100K, paid over 4 years.

[Anonymous]

Also if the firm has offices in multiple states, you pay state taxes in all those states. Also you pay estimated taxes (state and federal) quarterly. It is a huge pain. Thus the need for an accountant a PP referenced.

[Anonymous]

problem with the buy in is that it doesn't appreciate. the capital account is the same now as it is in 30 years or so when you retire. So you put in $100K (or $300K at a big firm), and in 30 years it is still $100K. Not sure if I like that. But so long as my income goes up by, say, $75K or more per year, I don't mind making the 3 annual payments at super low interest.

[Anonymous]

Ahh, the ponzi scheme of law firm partnership in 2013 revealed. What a scam.

[Anonymous]

Anonymous wrote:Not to derail the thread but is this all under wraps until you actually become partner? Are you told any of this beforehand or is it just generally understood that you'll just accept the set-up when you get called up for partner?

At every firm I've worked at, they just spring it on you after you make partner. My first dh, who was a big law partner, always said they have to do that, or the associates would figure out early on that partnership is a lousy deal.