Pitcher Partners recently conducted our fourth annual Legal Firm Survey. The survey was designed to gain further industry insight and to help firms make informed decisions during times of rapid change.
There are a number of things to consider when determining structure, governance and decision models for law firms:
How to protect assets and income
Ease of admission and exit of partners (including CGT on introduction or sale of interests)
Flexibility of distributions and remuneration
Impact on complexity of administration and taxation compliance
The impact of goodwill
The desired firm culture and behaviours
The level of transparency of decision making
Ensuring accountability for decision making
Level of direct engagement of partners and senior team leaders
From our experience, whilst each firm will have reason for the legal structure adopted, we believe the optimal structure choices (in order of preference) are:
A partnership of discretionary trusts
Discretionary trust with a corporate trustee
A partnership of individuals
Irrespective of the firm’s legal structure adopted, structure will influence but should not determine the governance model you choose. Once a legal structure has been chosen for your firm, choosing and implementing a good governance model will play an integral role in a well-run firm.