Prepare for partnership in advance.
You've worked hard and have what it takes to become a partner in your firm. Achieving partnership can be a wonderful professional accomplishment (and financially rewarding). However, you'll be asked to come up with the funding to cover costs such as professional indemnity insurance, fee blocks and partner buy-ins and buy-outs.
How much you will have to contribute varies by firm, but a typical capital contribution is at least $10,000 and sometimes $100,000 or more. Some firms require a one-time payment, but expect to be asked to contribute additional funds in the future.
Here's how to manage this financial outlay so that when you receive a partnership offer, you can answer "yes" without worrying how you'll pay for it.
Take Out a Bank Loan
As a professional earning a solid income, you will likely be offered a low interest rate loan by a bank to fund partnership costs. Although a loan is a viable option, you'll need to allocate some of your hard-won earnings as a partner to pay off this loan. If you are still paying off school loans, adding to your debt can seem overwhelming. Pay it down as quickly as you can, even if it means forgoing some of the perks of landing a professional career. The result of paying off this debt is that you'll have more disposable income when you do make partner.
Take Out a Firm Loan
Many law firms offer candidates a low-interest or interest-free loan to pay for the associated partner fees. While the interest rate is attractive, you must repay the loan in full if you decide to leave the firm, forcing you to either remain in a position that may not be best for your career or personal life, or to take out a loan to pay the remaining balance.
Save Now for Partnership
If you've got your sights set on partnership, start saving a portion of your salary today, so you'll be able to jump when partnership is offered. If you are still paying back loans for your undergraduate or law degree and saving money (hopefully) for retirement, saving for something that may not happen for five, ten or even more years may seem like a low priority. If you are ready to save for partnership, consider which investment vehicles make the most sense for your situation. The easiest--and often most effective--method is to automate savings with direct deposit into a savings or investment account.
Partnership is not out of your reach. Get in touch with your financial advisor to go over a plan that is best for you and your future.
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