Lawyers new to forming their own practices often look for someone to hook up with in partnership.
They often find someone who graduated in the same class who is in a similar situation.
It might be that both lawyers recently graduated and haven’t lined up jobs. They talk about forming a partnership and opening a practice.
Sometimes they’re not recent grads but they’ve been out for a few years practicing and they’re frustrated by their respective firms. They might not be from the same class, but they meet up and find they’ve got lots in common and think they’d be better off joining forces rather than striking out on their own.
Is a Partner a Good Idea?
Maybe.
Forming a partnership is a good idea if there’s a strategic benefit generated by bringing the lawyers together in one business. For instance:
- If one lawyer is great at litigation and the other is great at negotiation, they might offer complementary skills.
- If one is great at practicing law and the other is great at marketing, maybe they could join together and benefit one another.
- If one is excellent at management and the other has access to capital, maybe that would be a good combination.
It takes just the right mix of talent, skills, and abilities to create synergies that turn the combined whole into something greater than the separate parts. For a partnership to make sense, it needs to create some truly significant economic value that isn’t created by forming two separate businesses.
The fact is that it’s quite unusual for two lawyers to come together, especially early on in their careers, and form a partnership that is beneficial to each of the lawyers.
Sure, lots of lawyers go into partnerships. But, in my experience, most of those partnerships aren’t really beneficial to anyone involved. The lawyers talk themselves into believing that they’ve created some magical synergy with powerful effects, but they’re usually deluding themselves.
Most of those lawyers, desperately rationalizing their decision to come together in a business, are really just avoiding their fear of doing it alone. They’re using the partner as a crutch so that they don’t have to be by themselves in this scary undertaking. They don’t really have any good reason to create a partnership.
In fact, most law partnerships in small firms don’t create synergistic effects. I’m not just talking about newly formed entities composed of young lawyers. I’d suggest that the vast majority of small- and medium-sized law firms with lots of partners don’t create value beyond what would be created by separating all of the owners into their own practices. These firms are mostly glorified space-sharing operations creating some limited economies of scale. They’re usually more trouble than they’re worth.
Why Should You Go It Alone?
What do I mean when I say “more trouble than they’re worth”? Why isn’t it a good idea to form a partnership?
Because lawyers can’t stop arguing with each other about money.
Here’s the perfect recipe for a fight about money: put two lawyers in an office, give each lawyer an ownership in the firm, and wait a few weeks. The fight usually gets warmed up the first time they get a fee.
Most small partnerships spend far more energy fighting over the pie than they do increasing the size of the pie. In fact, for many of them, the fighting goes on as the pie shrinks. Some of these firms end up spending what little they have left litigating the division of the firm and its assets.
So should you form a partnership with your buddy? Probably not. Odds are that you’re not creating something better than you would have had doing your own thing independently. You’re probably not doing something that makes economic sense.
An Alternative to Partnership
Does that mean you and your buddy can’t work together?
Nope, it doesn’t. You don’t need to be partners to work together. You can refer business to one another. You can work together on cases. You can undertake strategic efforts that benefit both practices.
But, by maintaining your own businesses, you get the following benefits:
- You avoid the need to fight over money.
- You get to focus on the work and skip the inane management and marketing conversations.
- You can skip the ridiculous arguments over who’s doing more and who’s being more effective.
- You can skip the hours of bitching and moaning to your spouse about your partner, and you won’t have to endure your spouse ranting about how your partner is taking advantage of you.
Sure, form a partnership if you can find an outstanding reason. Go for it. But I think you’ll have a really tough time finding something you can only do together by becoming partners. Most everything you dream up can also be done while you practice separate and apart from one another.
Save yourself from the arguments, the aggravation, and the litigation. Form alliances with your friends and colleagues. Work together, but don’t feel compelled to lock yourselves into owning a business as partners.