Making Partner Costs More Money
With prices generally on the rise, law firms are no exception. And, in a struggling economy, many are seeking to reduce their borrowing.
The answer, a number have decided, is to ask their partners to pay more. As an alternative to borrowing from banks, such firms require partners to make up-front capital contributions. And a number of these are both increasing the amount they expect new partners to pay up-front, and expanding the amount of time it takes for capital repayment when they leave the law firm, reports the National Law Journal.
While, at least in theory, the partners eventually get their money back through increased law firm revenue, capital contributions can be painful. A growing number of new partners are borrowing to make the payments, according to Dan DiPietro of the law firm group at Citi Private Bank.
Among the firms that have upped the ante is DLA Piper, the largest law firm based in the U.S., which over the past seven years has nearly doubted the percentage of net income attributable to partner contributions, so that it could avoid bank debt while expanding to a 3,700-lawyer attorney roster.
“You want people to be vested in the firm,” Stephen Colgate, DLA Piper’s executive director, tells the NLJ. “You want them to have some skin in the game.”
