Written by Norman Clark
Published: 16 December 2015
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tree in a flooded lake

This is an important question, especially for small and midsize law firms that want to have a future.

Many smaller law firms are firms in name only. The partners share a common brand, office space, and expenses, but almost nothing else. My Walker Clark partner, Fernando Moreno, describes such a firm as a condominium.

the risks

Although a "law condominium" has some advantages, especially for retail law firms[1], we have observed some disturbing characteristics of this structure, which pose serious long-term risks for commercial law firms. These include, for example:

Each of these factors influences the profitability of these firms, as well as the profitability of each partner's practice. The inherent irony is that although some partners believe that the condominium structure is the best way to protect their individual financial interests, it also can curtail their individual opportunities. Although all of these risks can be managed reasonably well for a while, even in the loosest arrangement, they are much more difficult to manage over the long term. It takes a special type of commitment among all of the partners to do it successfully.

at your next meeting or retreat

This can be a very productive topic for a partners meeting or weekend retreat. Ask yourselves: What are we really: a law firm or a condominium? If you aspire to be a law firm that is a sustainable business institution in your market, but in reality act like joint tenants in a condominium, your governance, compensation system, and partnership values probably require honest and in-depth reconsideration.

Norman Clark

[1] As we use the term, a "retail law firm" is one that focuses primarily on the delivery of legal services to individuals, in areas such as family law, personal injury, criminal law, and real estate conveyancing, and to small businesses in routine commercial transactions and disputes. By contrast, a "commercial law firm" is one that focuses primarily on midsize and large businesses, banking and financial institutions, and high net-worth individual clients. There seldom is a sharp line that distinguishes a retail law firm from a commercial law firm; but most law firms are oriented toward one category or the other.