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Splitting profits: Review your partner profit-sharing arrangements

Benjamin Viney explores why law firms are reviewing their partner profit-sharing arrangements, why it can be so hard to do and how to go about doing it successfully

28 May 2013

There are four main reasons why many law firms are reviewing, or considering reviewing, their partner profit-sharing arrangements at present:

  1. there are greater pressures on profitability;

  2. current arrangements are not fit for purpose;

  3. dysfunctional partner behaviour is costing firms millions of pounds each year; and

  4. there is considerable planned and actual merger activity.

 

1. Pressures on profitability

For many years, most partners took home more money each year in absolute terms. When profits were high and growing, it was easier to keep most partners happy. However, in the past three or four years, this has generally not been the case, and weaknesses in profit-sharing arrangements have been felt more keenly.

This does not, however, necessarily lead to partners agreeing to...

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