Developing a partnership: when two become one

Using a hypothetical example of two solo lawyers who are developing a partnership, a panel of experts outlined the opportunities and potential problems that may face these lawyers as they establish a firm.

“Takin’ It to the House: The Law Firm as Business – Fundamentals of Organizing and Setting Up Your Firm’s Structure and Operation,” a program on Solo Day during the 2008 Annual Meeting featured panelists Michele Aiken of Aiken & Aiken; Jeffrey F. Allen of Amper, Politziner & Mattia CPAs; and Arthur Greene of Boyer Greene LLC. Patrick Begos of Begos Horgan & Brown LLP served as moderator.

Before hanging a shingle, potential partners must hammer out the details of their joint endeavor. On a basic level, the potential partners should agree on why a merger makes sense, with an understanding of each other’s hopes and aspirations.

Creating and signing a written agreement is also important, urged Greene.  Even if the two individuals involved are friends, having a signed agreement is critical, he said.

This agreement should address the short-term and consider plans three to five years in advance as well as encourage an even longer-term perspective – anticipating future employees as well as other partners and associates. The document should also be flexible and should address the potential occurrence of bad events.

Additionally, Greene advocated that the parties discuss the business structure – i.e., corporation, limited liability partnership, etc.

No matter what structure is agreed upon, said Greene, items that should be discussed and incorporated into the agreement include:

• Partners bringing in new partners
• Voting structure (majority, super majority, tie vote)
• What issues need a vote
• How to divide profits
• What circumstances will warrant expulsion of a partner or future employee
• What happens if a partner becomes disabled?

Expanding the hypothetical, Begos asked panelists for advice in the event that the partners eventually consider merging with another firm. Again, Greene emphasized the need to determine why the two firms seek a merger. Generally, the merging of two struggling firms is not a good idea, he said. Consider not only financials by reviewing partnership agreements, but also the cultural aspects of the second firm.

“Takin’ It to the House: The Law Firm as Business – Fundamentals of Organizing and Setting Up Your Firm’s Structure and Operation” was sponsored by the General Practice, Small Firm Division, Senior Lawyers Division, Young Lawyers Division and the Commission on Women in the Profession

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