Equity partners having to "buy in"

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What the f.supp?
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Equity partners having to "buy in"

Postby What the f.supp? » Thu Sep 15, 2011 4:01 pm

Admittedly I watched and enjoyed the show Suits on USA Network. When up for equity partner do they really have to write a huge check to the firm? Does anything else change once you're an equity partner? I hear you're paid quarterly or something?

Have a nice day.

Anonymous User
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Re: Equity partners having to "buy in"

Postby Anonymous User » Thu Sep 15, 2011 4:04 pm

Heard buying-in is common practice...at least from a colleague who used to work at Paul Hastings.

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Old Gregg
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Re: Equity partners having to "buy in"

Postby Old Gregg » Thu Sep 15, 2011 4:05 pm

What the f.supp? wrote:Admittedly I watched and enjoyed the show Suits on USA Network. When up for equity partner do they really have to write a huge check to the firm? Does anything else change once you're an equity partner? I hear you're paid quarterly or something?

Have a nice day.


They usually have to take out a bank loan to cover the capital contribution.

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Re: Equity partners having to "buy in"

Postby Anonymous User » Thu Sep 15, 2011 4:08 pm

Not always, sometimes they take it out of your distributions over time- so you stay poor, but build up equity.

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Re: Equity partners having to "buy in"

Postby Anonymous User » Thu Sep 15, 2011 4:09 pm

this may sound weird, but I had a callback where the partners were complaining about how high the buy-in had become.

I was like, uhh, irrelevant?

What the f.supp?
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Re: Equity partners having to "buy in"

Postby What the f.supp? » Thu Sep 15, 2011 4:13 pm

Any idea how much buy in for large firm? I think Suits was 500k. Cashiers check, obvi.

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swc65
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Re: Equity partners having to "buy in"

Postby swc65 » Thu Sep 15, 2011 4:18 pm

Wow I had never even heard of this. Makes some sense though. If you have a huge capital commitment, you might have more of an incentive to stay/make some rain.

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Re: Equity partners having to "buy in"

Postby Anonymous User » Thu Sep 15, 2011 4:22 pm

What the f.supp? wrote:Any idea how much buy in for large firm? I think Suits was 500k. Cashiers check, obvi.



from wsj 2008:

http://blogs.wsj.com/law/2008/07/07/price-of-partnership-on-the-rise-as-credit-crunch-hits-law-firm-loans/

Banker to lawyers and accountants wrote:
.capital contribution requirements for law firms are typically around 30% of projected comp, so if you expect to earn $1m you need to put in $300k. for big 4 accountants the capital contribution is much larger and is 50% of projected comp. this money is borrowed from a bank and often not paid back until the partner leaves the firm. also, firms usually pay interest on the capital. for law firms the rate they pay is often set at the same rate of interest due on the loan. this is not the case for the accountants; they typically pay more than the borrowing cost which creates a lucrative arbitrage opportunity for partners.
.

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Old Gregg
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Re: Equity partners having to "buy in"

Postby Old Gregg » Thu Sep 15, 2011 4:35 pm

Anonymous User wrote:Not always, sometimes they take it out of your distributions over time- so you stay poor, but build up equity.


Yes, that's why I used the word, "usually."

:roll:

What the f.supp?
Posts: 137
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Re: Equity partners having to "buy in"

Postby What the f.supp? » Thu Sep 15, 2011 4:58 pm

Just the info I was looking for. Thanks peeps!




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