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The Seventh in a Series of Partner Compensation Structure Articlesby Debra L. Bruce, JD, PCC×Print PDF version Of This HOW TO GUIDE. Print the full 7-part series here.This is the Appendix A mentioned in the previous articles in this series discussing structures that law firms commonly adopt for partner compensation.APPENDIX ASample Partnership Agreement Provisions Respecting Compensation Selected Provisions OfAgreement of Limited Liability PartnershipOfA & B, L.L.P.[not intended as a complete partnership agreement]             This AGREEMENT OF LIMITED LIABILITY PARTNERSHIP of A & B, L.L.P. is entered into to be effective as of the __ day of ___, 20__ by and among A (“A”) and B (“B”) (collectively, the “Partners”) pursuant to the provisions of the [State] [Partnership Law], and according to the terms and conditions set forth herein.             NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: Section ITHE PARTNERSHIP            1.A      Statutory Compliance.  * The Partnership shall qualify as a registered limited liability partnership in all applicable jurisdictions.            1.B      Noncompetition.  * [“In term” competition is forbidden]            1.C      Definitions.  Capitalized words and phrases used in this Agreement have the following meanings:                        (a) “Bonus Distribution” has the meaning set forth in Section 3.A hereof.                       (b) “Draw” has the meaning set forth in Section 3.A …

The Sixth in a Series of Partner Compensation Structures: “Eat What You Kill”by Debra L. Bruce, JD, PCC×Print PDF version Of This HOW TO GUIDE. Print the full 7-part series here.This is the 6th article in a series of 7 discussing structures that law firms tend to adopt for partner compensation.Eat What You Kill (EWYK) Description Each lawyer’s compensation is based on the revenues she generates. Usually there is some kind of formula that attempts to account for overhead, and then distributes all remaining profits to the lawyers based on their collections. In some systems a flat dollar amount is determined for overhead per lawyer, by dividing up the sum of fixed and predictable expenses, such as rent and shared staff salaries. Everything the lawyer bills and collects in excess of the fixed overhead figure gets paid to that lawyer after subtracting certain firm expenses directly associated with that lawyer such as business development expenses, retirement plan contributions, and salaries of staff or associates who work mostly for that attorney. In that model the firm is more akin to an office sharing arrangement than a partnership. A variation of the EWYK model does provide for sharing of risk. The firm’s …

The Fifth in a Series of Partner Compensation Structures: “Modified Lockstep”by Debra L. Bruce, JD, PCC×Print PDF version Of This HOW TO GUIDE. Print the full 7-part series here.This is the 5th article in a series of 7 discussing structures that law firms tend to adopt for partner compensation.Modified Lock Step Description Many firms have modified the lock step model to allow a committee to subjectively reward or punish behavior. The modification helps the firm to encourage essential behaviors such as business development, high productivity, recruiting, training and mentoring associates, management, and client relationship maintenance. It also provides the flexibility to bring underperforming partners into line, without having to completely expel a partner. Some of the modifications may include the ability to promote a partner to a higher level earlier than the other classmate partners or demote a partner to a lower level. There may also be a “slush fund” for allocating bonuses to reward desired behavior. Appendix A (published as the 7th article in this series) contains an example of provisions that might be included in a modified lock step compensation plan. The author extends her gratitude to Bill McDonald, a partner at Thompson & Knight LLP, whose practice includes …

The Fourth in a Series of Partner Compensation Structures: “Lockstep”by Debra L. Bruce, JD, PCC×Print PDF version Of This HOW TO GUIDE. Print the full 7-part series here.This is the 4th article in a series of 7 discussing structures that law firms tend to adopt for partner compensation.  In Part 1 we discussed the Monarch structure, in Part 2 the Parity structure, and in Part 3 the Executive Committee Monarchy.Lock Step Description This model is used mainly in large, stable, well-established firms that have a lot of institutional clients. It rewards seniority. Usually, all of the lawyers who become partners in the same year are in a class, and make the same compensation. The class as a whole receives an increase in points, which are the basis of allocating profit distributions, when they are elevated to the next level. Typically, the spread between the salary of the highest paid partners and the lowest paid partners is not that large – 3 or 4 to 1 is not uncommon. When It Works Well The firm that has existed for decades and serves many clients that need multiple areas of legal expertise, and therefore the clients have strong relationships with many lawyers in the firm, can function well with the lock step …

The Third in a Series of Partner Compensation Structures: “Executive Committee Monarchy”by Debra L. Bruce, JD, PCC×Print PDF version Of This HOW TO GUIDE. Print the full 7-part series here.This is the 3rd article in a series of 7 discussing the different kinds of partnership compensation structures that law firms tend to adopt. Part 1 discussed the Monarch structure, which involves one partner who rules over the others on compensation issues. Part 2 described the Parity structure, in which the partners share the partnership profits evenly.Executive Committee Monarchy Description Both of the prior structures are usually only found in small firms of ten partners or fewer.  In a larger firm, the Monarch structure may be expanded to a ruling executive committee. In this situation a rather stable and predictable executive committee functions like a single monarch. Usually they are the founding partners or otherwise the most experienced and successful lawyers in the firm. When It Works Well This structure works when the executive committee, as a body, has the same attributes as the type of single monarch that functions well in this system. They are fair-minded and communicate expectations clearly. In addition, the members of the executive committee must have values and priorities compatible with …