- Non-equity partners are very different from equity partners primarily in that they are salaried and do not share in the profits of the firm.
- Some firms systematically turn senior associates into non-equity partners, but occasionally you can find non-equity partners in niche practices or by personal choice.
- If you run into non-equity partnership along your career path, you will need to find out what it specifically entails at your particular firm and situation.
Making partner at a law firm usually comes with a new set expectations for both compensation and responsibilities. The title of “partner” communicates to the outside world that the lawyer has an ownership interest (equity), a personal stake in the business, and shares in the profits of the firm.
However, some Biglaw firms will have an intermediate step between associate and equity partner. That in-between position is often the “non-equity partner.” Read on to learn about the differences between different kinds of partner titles and what it might mean for your career at a law firm.
Law firm partnership is a common goal for most people who have graduated law school. In many different practice areas, the achievement for law firm partners is one worth celebrating. Being on partner track requires a lot of work and perhaps years of proving your worth before getting offers for senior partners or managing partners. New partners must show they have strongly contributed to the bottom line.
Equity vs. non-equity partner
Law firms most commonly use a business structure called a partnership. Partners in business are people who combine resources to share risk, profits, and losses. These kinds of partners are what people usually think of as equity partners (also called shareholders or principals, though less frequently in law firms). In law firms, equity partners are usually seasoned lawyers with years of legal experience. In many cases, a partnership agreement is used to outline the type of partner (such as non-equity partner or income partner) and to address other concerns like partner compensation, expectations over billable hours, management of firm profits, the roles of any manager partner, and more.
These lawyers are made partners by the firm because the existing partnership believes that they will be more profitable for doing so. Equity partners “buy-in” and use their own capital to join the firm’s circle of owners. Unlike associates, equity partners are not limited to a compensation structure of a salary + bonus but earn their money by generating and contributing to the firm’s revenue. Equity partners will more frequently pitch to clients, originate matters, and lead teams (or work solo) rather than get assigned to work under others.
The precisely defining non-equity partner is a more difficult endeavor. Non-equity partners are surely partners in title. A firm can promote a senior associate and advertise them as a partner on the website without distinguishing between equity and non-equity.
However, the other qualities of being an equity partner may be very similar or entirely absent and anything in the middle. Non-equity partners might have no buy-in, no matter originations, and usually are paid a set salary that is often higher than, but still similar to what a senior associate earns.
Many of the differences between equity and non-equity partnership will vary from firm to firm. An important aspect of partnership is that business decisions, both governance and operations, are made together among partners. How much a firm chooses to involve non-equity partners in these regards (e.g., voting rights, committees, etc.) is really up to the firm.
Some firms treat non-equity partners pretty much exactly like equity partners except for compensation. Other firms might use the non-equity partner position as a training ground for potential equity partners. During non-equity partnership, promising senior associates can be given a transition period to develop the skills and book of business that an equity partner would need to be profitable, all under the official title of partner.
Finally, some firms are known to treat their non-equity partners no differently than the senior associates they just got promoted from, using the non-equity partners to generate high billable rates under the “partner” title, all on affordable salaries.
Non-equity partnership and your career
Most people will face non-equity partnership considerations while rising through the ranks within a law firm. One prominent example is how Kirkland & Ellis will turn most of their seventh-year associates into non-equity partners.
This process at Kirkland & Ellis is so well known that a brief stint in their non-equity partnership structure could mean that another firm still calculates a lateral attorney as a senior associate. Many in the industry consider Kirkland & Ellis’s non-equity partners to be “glorified senior associates,” but it is not certain how the business development or compensation changes for these non-equity partners.
If you are a junior associate hoping to rise through the ranks at a firm with structured non-equity partnership like Kirkland & Ellis, there should be no element of surprise as you approach your sixth+ associate year.
Certain niche practices will benefit from the title of partner without actually carrying the full weight of equity partnership. If a niche practice is maintained by the firm but is not profitable enough to grow as a group or generate significant revenue, a non-equity partner might be the perfect solution.
Clients will want to know that there is a partner working for them, but a salaried specialist might be the most efficient for firm operations. In this situation, a non-equity partner is used to increase client confidence in the firm’s practice while keeping costs low.
Non-equity partnership can also be an important part of decision making for those who are averse to elements of partnership like the buy-in or matter origination. The title of partner can be great for developing a personal brand or increasing billable rates, but capital contribution, voting rights, and irregular compensation do not always appeal to everyone. In addition, equity partners are responsible for their own benefits while non-equity partners continue to receive benefits like any other salaried attorney.
In any event, becoming a non-equity partner is not a bad thing per se. For most, it is a positive signal that an associate is on the right track to becoming an equity partner and that the firm is willing to hold the associate out to the public the same as an equity partner. Non-equity partnership can be a great time to adjust to certain partnership responsibilities without fully taking on the entire role.
If you’re wondering whether non-equity partnership may be right for you, look at your current employer and first determine if non-equity partnership is even an option… perhaps it is even mandatory. If a non-equity partnership opportunity is available, finding out the details will be crucial.
Compensation might be flexible, and the exact architecture of the position will vary from firm to firm for many aspects of the job. As a non-exhaustive list, we suggest looking into at least the following:
- Compensation & bonuses
- Buy-in or capital contribution structure
- Employee status (and with this, benefits)
- Sharing of work origination and credit
- Expectations of performance quality and quantity
- The balance of equity and non-equity partners
- Whether a promotion into equity partner is available after a few years (or if there’s an up-or-out policy)
Joseph Kim is a 2L at Notre Dame Law School. Joseph grew up in California where he developed an interest in working with music, powerlifting, and bowling. He’s been a member of the FIRE community since before law school and plans to pursue FatFIRE following graduation.