As they say; the cobblers children have no shoes, and so too in law. When you set up your own law firm you are no doubt planning for growth and for the long term and, in many ways, you have a one-off opportunity to agree how that business will be owned and controlled going forward and what should happen should certain events take place such as the death or exit of a partner or the need to recruit a new partner. Of course you could address such an event when it happens, but that may not be the best course of action. There are lawyers who make whole careers in unscrambling unsuitable partnerships and this is a cautionary tale.
According to one such partnership lawyer, Peter Garry, “about half of my legal practice dispute work arises from there being no or no adequate governing agreement. Without well thought through terms, exiting partners (or their personal representatives) can sometimes hold the continuing/surviving partners to ransom, or sometimes, depending on the circumstances and the entity type, that position may be reversed. For example, difficulties may arise when personal representatives of a deceased legal practice shareholder, who are not authorised by the SRA, become the owners of his shares. Equally an LLP member who tenders his resignation may find that he will have difficulty retrieving his capital and/or any unallocated profit share, unless there are express provisions which deal with that.”
There is an alternative solution if you seek all the flexibility and freedom of setting up your own law firm but wish to avoid the investment inherent in setting up.