Anonymous
07/12/2023 20:00
Subject: Re:Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:What's the firm's recent financial situation? Most firms in AmLaw 100 had record years in 2020 and 2021, picture very different in 2022/23 due to significantly slowdown in deals last year. So you may have made partner at just a difficult cyclical moment, where you are dealing with all the "start up" costs of partnership but also seeing smaller payouts due to belt-tightening. It should even out longterm, but now might be a bit of a pinch point.
Firms don't always do a great job of preparing partners for the financial challenges of that shift. Do you have a good financial manager you can trust? Do you feel that you properly structuring your finances with regards to taxes? I would focus on finding a good, conservative advisor to help with tax and money management, and they will help you structure things so you can avoid cash flow issues during these initial years when the capital contribution and shifting from ordinary income to distributions can be tricky.
Thank you. We need to do this. We unfortunately bought a new home and signed on for private school for another child right before making partner, not aware how cash flow would change. Partnership was not from within but rather from government so we hadn’t saved. Just stressed about cash flow.
I haven't read all of the responses but I think the bolded was a HUGE mistake. You probably bought an expensive new house based on your salary projections just to realize afterward you weren't actually bringing home as much as you thought.
My DH is a big law partner and the first year or two we definitely did not make any major purchases since the tax bill was way higher than when he was a senior associate.
No, it wasn’t a huge mistake. That part is fine. We bought a home based on the combined salary we had at the time. Our mortgage is not that high. We were renting previously. Our home has also gone up almost a million in value. The issue, once more, for the wives in the back, is that we are making much less per month than we were. The smug judgments aren’t helpful, really. They’re just not. Keep them coming, though, it must make you feel good.
First time I’m posting on this thread but OP sounds obnoxious, entitled and unlikeable. Why are so many law partners like that?
Is this your first time learning to read as well? OP is not a law firm partner. OP is the spouse of a recent law firm partner who spouse came over to a firm from the government.
Yep. And all she saw was dollar signs and started spending willy nilly before actually bothering to see how it was all going to work.
Lol Willy Nilly. Okay. Both spouses are high earners.
If that were true, you wouldn’t need to crowd source how to pay your bills.
Anonymous
07/12/2023 19:54
Subject: Re:Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:OP, did your family have a personal accountant aware of DH's career trajectory? If not, that's a critical mistake.
While the bumps in the road for a new partner can't completely be removed, a good accountant can certainly smooth them over.
The numbers for new partners are not shared with non-partners. There is no way to prepare. Other than save money and do not buy a house at this point. In 4-5 years you will be swimming in money. Just need to wait.
In my firm the incoming partners get a series of classes on law firms economics, how their draws and finances will work, which accountants are familiar with the firm’s K-1, etc. It’s very common knowledge that new partners are often cash flow constrained.
Anonymous
07/12/2023 19:50
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Yes they give you back the buy in.
Always? My very small firm has proposed a succession plan where I would not get my buy in back if I leave because the partners who benefit are retiring. It seems unreasonable?
This isn’t in your partnership agreement already?
Anonymous
07/12/2023 19:49
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Yes they give you back the buy in.
Unless the firm fails. Which does happen.
Very, very rarely in Biglaw. Why is everyone so damned jealous?
I went through two in a row. It happens.
Anonymous
07/12/2023 17:52
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Yes they give you back the buy in.
Unless the firm fails. Which does happen.
Very, very rarely in Biglaw. Why is everyone so damned jealous?
I'm pp. Not jealous. Got burned by one.
Anonymous
07/12/2023 17:49
Subject: Re:Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Anonymous wrote: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.
You're the one who can't figure out how to survive on $240K/yr after taxes?
And you are rolling your eyes?
Yes, it’s a lot of money. It’s also less than we made previously. That’s the issue. Thank you for taking the time out of your busy day feeling morally superior and managing your husbands income to look down upon me.
OP I just posted, and am reading the thread. You really are going to have to get used to this as a partner. You might make even less next year. DH is making less than two years ago, and he's up a band. It's because the firm is being conservative based on the market. I really hate the uncertainty, too, but you're going to have this every single year, so you have to make peace with it. (I mean it really is tiny violins in the scope of things.) I mentioned finding an accountant who works with a lot of partners, who knows the financial structure. Things will change year to year. You might have to pay in an extra state or overseas if they open an office. The firm may have you pay a tax, but then they pay it. The other thing you can do is to get more business, so you can go up a band. That will mean more money.
Anonymous
07/12/2023 17:45
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Yes they give you back the buy in.
Unless the firm fails. Which does happen.
Very, very rarely in Biglaw. Why is everyone so damned jealous?
Anonymous
07/12/2023 17:44
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Yes they give you back the buy in.
Always? My very small firm has proposed a succession plan where I would not get my buy in back if I leave because the partners who benefit are retiring. It seems unreasonable?
Anonymous
07/12/2023 17:42
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Yes they give you back the buy in.
Unless the firm fails. Which does happen.
Anonymous
07/12/2023 17:41
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
OP -- isn't there an accountant who specializes in your firm's tax structure? Every firm is different, and they can help you with cash flow. But, by year 2 you should have safe harbor, so you should know what your tax payments are going to be, and the firm *should* give you a schedule of distributions. Your monthly is pretty low, though.
Like others, I'm not sure what the *overhead* is. We took a loan for our contribution, which is handled through the firm. While the deferred compensation is a pain, it will be very nice in retirement. I'm a BL spouse, and if your spouse does finances, they should sit in on the financial/tax meetings. I do because DH does not understand/care -- LOL. But, it's important for one of you to know what's going on and be able to project.
Like others, I'm not sure what the *overhead* is. We took a loan for our contribution, which is handled through the firm. While the deferred compensation is a pain, it will be very nice in retirement. I'm a BL spouse, and if your spouse does finances, they should sit in on the financial/tax meetings. I do because DH does not understand/care -- LOL. But, it's important for one of you to know what's going on and be able to project.
Anonymous
07/12/2023 17:32
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
Yes they give you back the buy in.
Anonymous
07/12/2023 17:22
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
What happens to an equity partner’s ‘investment’ if they leave for another job, for example to go solo, start a small firm, or go in house? I remember a friend sharing that the the buy in at their firm was seven figures. I lost contact with that person but they’ve since left the firm after at least starting the process. I’ve seen this happen several times over the years.
Anonymous
07/12/2023 17:14
Subject: Yes, tiny violin - did anyone else struggle first years of law partnership?
It’s like Biggie said - mo money, mo problems
Anonymous
07/12/2023 16:47
Subject: Re:Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:What's the firm's recent financial situation? Most firms in AmLaw 100 had record years in 2020 and 2021, picture very different in 2022/23 due to significantly slowdown in deals last year. So you may have made partner at just a difficult cyclical moment, where you are dealing with all the "start up" costs of partnership but also seeing smaller payouts due to belt-tightening. It should even out longterm, but now might be a bit of a pinch point.
Firms don't always do a great job of preparing partners for the financial challenges of that shift. Do you have a good financial manager you can trust? Do you feel that you properly structuring your finances with regards to taxes? I would focus on finding a good, conservative advisor to help with tax and money management, and they will help you structure things so you can avoid cash flow issues during these initial years when the capital contribution and shifting from ordinary income to distributions can be tricky.
Thank you. We need to do this. We unfortunately bought a new home and signed on for private school for another child right before making partner, not aware how cash flow would change. Partnership was not from within but rather from government so we hadn’t saved. Just stressed about cash flow.
I haven't read all of the responses but I think the bolded was a HUGE mistake. You probably bought an expensive new house based on your salary projections just to realize afterward you weren't actually bringing home as much as you thought.
My DH is a big law partner and the first year or two we definitely did not make any major purchases since the tax bill was way higher than when he was a senior associate.
No, it wasn’t a huge mistake. That part is fine. We bought a home based on the combined salary we had at the time. Our mortgage is not that high. We were renting previously. Our home has also gone up almost a million in value. The issue, once more, for the wives in the back, is that we are making much less per month than we were. The smug judgments aren’t helpful, really. They’re just not. Keep them coming, though, it must make you feel good.
First time I’m posting on this thread but OP sounds obnoxious, entitled and unlikeable. Why are so many law partners like that?
Is this your first time learning to read as well? OP is not a law firm partner. OP is the spouse of a recent law firm partner who spouse came over to a firm from the government.
Yep. And all she saw was dollar signs and started spending willy nilly before actually bothering to see how it was all going to work.
Lol Willy Nilly. Okay. Both spouses are high earners.
Anonymous
07/12/2023 16:46
Subject: Re:Yes, tiny violin - did anyone else struggle first years of law partnership?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:What's the firm's recent financial situation? Most firms in AmLaw 100 had record years in 2020 and 2021, picture very different in 2022/23 due to significantly slowdown in deals last year. So you may have made partner at just a difficult cyclical moment, where you are dealing with all the "start up" costs of partnership but also seeing smaller payouts due to belt-tightening. It should even out longterm, but now might be a bit of a pinch point.
Firms don't always do a great job of preparing partners for the financial challenges of that shift. Do you have a good financial manager you can trust? Do you feel that you properly structuring your finances with regards to taxes? I would focus on finding a good, conservative advisor to help with tax and money management, and they will help you structure things so you can avoid cash flow issues during these initial years when the capital contribution and shifting from ordinary income to distributions can be tricky.
Thank you. We need to do this. We unfortunately bought a new home and signed on for private school for another child right before making partner, not aware how cash flow would change. Partnership was not from within but rather from government so we hadn’t saved. Just stressed about cash flow.
I haven't read all of the responses but I think the bolded was a HUGE mistake. You probably bought an expensive new house based on your salary projections just to realize afterward you weren't actually bringing home as much as you thought.
My DH is a big law partner and the first year or two we definitely did not make any major purchases since the tax bill was way higher than when he was a senior associate.
No, it wasn’t a huge mistake. That part is fine. We bought a home based on the combined salary we had at the time. Our mortgage is not that high. We were renting previously. Our home has also gone up almost a million in value. The issue, once more, for the wives in the back, is that we are making much less per month than we were. The smug judgments aren’t helpful, really. They’re just not. Keep them coming, though, it must make you feel good.
PP here - thats was fine when you were making what you were making at the time. But now you aren't bringing in as much and can't afford your house/lifestyle. I am just saying making a large purchase like a home during your first year of partnership isn't the smartest decision. Obviously that ship has sailed. But for others who are in a similar position I would highly suggest not doing a large purchase during your first year until you know how your taxes/contributions, etc shake out.
Best of luck to you - a HELOC seems like the best option.
We bought the home 1.5 years before making partner.