Why are all biglaw firms partnerships? Forum

[redsox421]

Just a curious 0L wondering why biglaw firms (and most consulting firms, at that) typically function as partnerships instead of corporations like companies of similar size/revenue in other industries. Is there something particular about the law industry that makes being a partnership preferable to being a corporation, or is it mostly b/c of reasoning along the lines of "this is the way it's always been done"?

Same question regarding the Cravath system. Why is this system dominant in law/consulting? Is there something unique to these industries that makes the Cravath system better than, say, hiring fewer people and keeping them long-term like in other industries?
Thanks in advance for any responses.

[Zugzwang]

Because something like federal law bars investment by third parties into law firms. Imagine if law firm ABC was representing plaintiff X against defendant corporation Z. LOL Z BUYS A CONTROLLING SHARE OF LAW FIRM ABC BECAUSE IT IS A CORPORATION TOO.

[redsox421]

Makes sense.
Anybody have any thoughts regarding my question about the Cravath system?

[legalease9]

Time for some 0L speculation!

I think that its hard for a firm to know who will make a "great" firm partner and who will not. By hiring a bunch of graduates and dumping the losers, they get a broad range of candidates for partnership, so the winners will stand out. If they just picked the best few law students and kept them forever, they wouldn't have as diverse a pool to chose partners from.

[redsox421]

Makes sense.
However, why not keep the associates who don't make partner? I would imagine their work product would be substantially better than first year associates thanks to years of experience.
I mean, in other industries you don't have to make the very tippy-top of your company in order to stay on as a worker, right?

[kurla88]

Makes sense.
However, why not keep the associates who don't make partner? I would imagine their work product would be substantially better than first year associates thanks to years of experience.
I mean, in other industries you don't have to make the very tippy-top of your company in order to stay on as a worker, right?

A lot of times it's the associates who leave if they know they're never going to advance.

[LawProfessor123]

Among other reasons, corporations face double taxation.

Just a curious 0L wondering why biglaw firms (and most consulting firms, at that) typically function as partnerships instead of corporations like companies of similar size/revenue in other industries. Is there something particular about the law industry that makes being a partnership preferable to being a corporation, or is it mostly b/c of reasoning along the lines of "this is the way it's always been done"?

Same question regarding the Cravath system. Why is this system dominant in law/consulting? Is there something unique to these industries that makes the Cravath system better than, say, hiring fewer people and keeping them long-term like in other industries?
Thanks in advance for any responses.

[dood]

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[270910]

At large law firms, huge numbers of people leave because they can't fucking stand it, not because they firm decided to show them the door. In even modest economic times there tend to be shiny exit options, and the biglaw life style (in no small part the long hours, but chiefly the total unpredictability of the work flow) drives people out.

As to why the big law lifestyle is what it is, it's because the industry charges a premium for a more or less as fast as possible and perfect service. Being on-call for a client means long, random hours and a place staved with sleep deprived experts. That life is not for everyone. And so the practice of leveraging partners by hiring lots of associates goes hand in hand with the practice of quick and excellent client service for Mega Corps.

[wiseowl]

it's not universal. there are a number of firms that are P.C.'s

[Grond]

Because something like federal law bars investment by third parties into law firms. Imagine if law firm ABC was representing plaintiff X against defendant corporation Z. LOL Z BUYS A CONTROLLING SHARE OF LAW FIRM ABC BECAUSE IT IS A CORPORATION TOO.

That's why there are PCs, PLLCs, and PAs. So that law firms can organize as corporations, LLCs, etc.

[Black-Blue]

Same question regarding the Cravath system. Why is this system dominant in law/consulting? Is there something unique to these industries that makes the Cravath system better than, say, hiring fewer people and keeping them long-term like in other industries? Thanks in advance for any responses.

Yes. These industries are prestige-oriented industries. Same as investment banking, which also uses the same model.

[Stanford4Me]

Also, just to be clear, corporations are not double taxed. Anyone with a basic understanding of entity taxation knows this.

The corporations themselves are not double taxed, sure, but it is basic knowledge that one of the drawbacks of establishing a corporation is the double taxation effect which occurs from multiple taxes being applied to the same flows of cash.