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Hey Guys,
A samaritan is creating a dashboard for us to help understand the market standards for your skillset and help us to realize if we are underpaid!? And this helps us to negotiate as well
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Consult with an attorney or other business succession professional because there are many ways to become an equity partner. You also need to learn how to properly evaluate the profitability of the business. As an equity partner, you may find you are paying out more than you are reviving, depending on if the business is going through a slump or not.
Plus, a partnership is very similar to a legal marriage - so imagine a divorce between three attorneys if something goes south. You need the partnership properly defined so everyone knows what will happen if it doesn’t work out.
OP: it’s the entire process that can use the perspective of an outside attorney who isn’t involved in the emotions of the transaction. There are many things to consider apart from how to split equity.
If you want a true business valuation, you need to talk to someone who does business valuations. That may or may not be an attorney. They would look at both the profit and cost/loss and various other things to provide you with an assessment.
... our current cases. In other words, they have been paying salaries and building our lodestar on cases we think will settle. If I can profit share in those cases, they want me to have shared in the costs too. So my second question, how is this done? I’m thinking we need to bring an independent to examine their books and give us a value of the partnership given our costs and pending cases.
I don’t think that rule applies here (see my reply below) but I appreciate the rule as a yardstick. I am pretty confident that it will work out much better for me financially to be equity as I would profit from the work of those I supervise and train, other than just my own, but I didn’t think about the cost of buying in and whether that would be worth it.
One do you have complete access to the books? Two, are you getting equal shares? Three, you are now acquiring liability with your new status, so is it worth it? What is the long term goal? Are you looking to buy out the other two in the long run? Be careful what you do. A non-equity partner is merely a glorified associate with some liability exposure. Tread lightly
I would demand full access to books. I currently have full access to profit information, but only estimated costs. I would ask for equal share, but that could be negotiated. As far as liability, the firm has been highly profitable all but one year in the last seven years (when our cases were all pending and none resolved that year). I also know that the equity partners each get a minimum of 30% of all recoveries, the balance, usually around 40%, is distributed to all attorneys based on lodestar. So in my mind, it seems fair to ask for for 20% of all recoveries (for each of the three equity partners), and even taking into consideration costs, I would be earning more this way. The monkey wrench to me is how much they’d expect me to buy in to value my share of the partnership.