Equity partner Totally Explained

Everything about Equity Partner totally explained

An equity partner is a partner in a partnership who is a part owner of the business, and is entitled to a proportion of the distributable profits of the partnership. The term is used in contra-distinction to a salaried partner who are paid a salary, but don't have any underlying ownership interest in the business and won't share in the distributions of the partnership (although it's quite common for salaried partners to receive a bonus based upon the firm's profitability). Although they're both regarded as partners, in legal and economic terms, equity partners and salaried partners have little in common other than joint and several liability. The degree of control which each type of partner exerts over the partnership depends upon the relevant partnership agreement.
The division between equity and salaried partners could, in theory, occur in any partnership, but in practice, the distinction is most frequently referred to in law firms and accountancy firms.

Type of equity partnership

In their most basic form, equity partners enjoy a fixed share of the partnership (usually, but not always an equal share with the other partners).
   However, in more sophisticated partnerships, different models exist for determining either ownership or profit distribution (or both).
   Probably the most common two forms are "lockstep" and "eat-what-you-kill" (sometimes referred to, less graphically, as "source of origination").
   Lockstep involves new partners joining the partnership with a certain number of "points". As time passes, they accrue additional points, until they reach a set maximum. The length of time it takes to reach the maximum is often used to described the firm (so, for example, one could say that one firm has a "seven year lockstep" and another has a "ten year lockstep" depending upon the length of time it takes to reach maximum equity).
   Eat-what-you-kill is rarely, if ever, seen outside of law firms. The principle is simply that each partner receives a share of the partnership profits up to a certain amount, and any additional profits are distributed to the partner who was responsible for the "origination" of the work which generated the profits.
   British law firms tend to use the lockstep principle, whereas American firms are more accustomed to eat-what-you-kill. When British firm Clifford Chance merged with American firm Rogers & Wells, many of the difficulties associated with that merger were blamed upon the difficulties of merging a lockstep culture with an eat-what-you-kill culture.

Further Information

Get more info on 'Equity Partner'.

External Link Exchanges

Do you know how hard it is to get a link from a large encyclopaedia? Well we're different and will prove it. To get a link from us just add the following HTML to your site on a relevant page:

<a href="http://equity_partner.totallyexplained.com">Equity partner Totally Explained</a>

Then simply click through this link from your web page. Our crawlers will verify your link, extract the title of your web page and instantly add a link back to it. If you like you can remove the words Totally Explained and embed the link in article text.
As long as your link remains in place, we'll keep our link to you right here. Please play fair - our crawlers are watching. Your site must be closely related to this one's topic. Any kind of spamming, dubious practises or removing the link will result in your link from us being dropped and, potentially, your whole site being banned.