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By banding collectively, they each can market themselves as part of a larger firm and get more business. Fred lands a large overseas client and starts doing pretty well. He spends years flying overseas to talk with this client and must hire a number of attorneys to handle the increasing amount of work.
Within a few years, more than half the firm’s business originates with Fred. Fred has to break up the company earnings equally with Barney Yet, Wilma, and Betty. The firm partnership contract has one unique feature – the money that every partner attorney bills is earmarked for themselves. Overall income (from client confirming letters, associate attorneys, paralegals, duplicate fees) are divided equally among the companions.
So Fred has the clever idea that he should “pad” each bill to his client with an hour-and-a-half of his time, whether or not he done the case, and subtract the same amount from each affiliate. This way he gets covered “his” client’s work. Unfortunately, it is costs padding, which is unlawful. Even worse, Fred put this in a memo to all his associates. His partners were furious and his associates were none too happy.
One of these sends a duplicate of the memo to the State Bar, and a study ensues. The firm breaks up – which computes better for Fred in any case. He was getting screwed by his partners, a few of whom were billing their take-home pay barely, much less making a profit for the firm. Fred requires the best associates and his clients and movements to a fresh company where an iron-clad relationship agreement (running over 200 web pages) diverts more of the income from his client’s work to him.
The remaining companions flounder. Some find work at other firms. Others retire. A couple of band together to create a new firm, but it generally does not go anywhere. They realize given that Fred was the “whale” or “rainmaker” at the old company, and they must have reworked the collaboration agreement rather than being greedy and taking all of Fred’s money and forcing the break up.
- 3 – 2012 – 15 Spending – $950
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Of course, Fred’s strategy was just as flawed. He must have remaining the company when he experienced it was unfair to him, rather than trying back-door ways (unlawful ways) of diverting cash. Moral: What starts out as a little enterprise where many people are equal, can quickly morph into a larger enterprise where efforts by each partner are lopsided. A partnership agreement should consider that conditions can transform. And partners should realize that sticking together is probably a better idea than being greedy.
Alas, greed usually wins your day. 3. Ricky chooses to open up his own law practice. He has several good clients and an office building, which he has. Business is doing well, and he is making a little money. Ethel, who Rickey knew from a previous firm, comes in from out of town and tells Ricky she expects to be produced full partner in the firm, immediately.
Ricky balks. He’s spent hundreds of thousands of dollars in the company, and thousands of man-hours. Why should Ethel – who does not have any client base at all – get fifty percent of what he worked for? Ethel’s targets are unrealistic – however they mirror the expectations of a lot of “salary slaves” who have no idea what a relationship means or how hard it is to perform a business.