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GAZETTE
APRIL 1978
SOCIETY OF YOUNG SOLICITORS SECTION
Partnership in a
Mr. Walter Semple, a partner in one of the largest firms of
Solicitors in Glasgow, gave the opening lecture on the
above subject to the recent Seminar of the Society held in
the Great Southern Hotel, Killarney on the 8th and 9th
April.
Mr. Semple's paper was aimed primarily at the young
Msistant Solicitor to give him some idea of what was
involved if a partnership was offered to him; he was also
anxious, however, to deal with the subject in a way that
would be of interest to those who were already partners.
Mr. Semple dealt with four matters that a young
Solicitor should consider when offered a partnership:
1. Income possibilities.
2. Job satisfaction.
3. The capital structure of a partnership.
4. Proper retirement provisions.
1. Income
Mr. Semple made no apologies for placing a
requirement for a reasonable income at the head of his
list.. He advised a young Solicitor, when invited to become
a partner, to ask for the last three or preferably five years
accounts of the firm to examine the trends of gross fees,
expenses and profits. Profits should be keeping pace with
inflation. The ratio of gross fees to expenses should be
around 50:50 in a medium sized firm and slightly more in
a large firm.
The prospect of future profits should be considered and
in this regard the areas of law in which the firm practises
should be considered as should also the present
partnership structure. Is the firm too reliant on old
partners whose health or capacity to continue may be in
doubt? Mr. Semple also recommended specialisation and
departmentalisation in a larger firm and the introduction
of systems, including time costing, to enable the results of
various departments to be compared. He felt, however,
that a time costing system should never be used as a basis
of profit sharing as many other factors governed that
question.
On the question oi whether a new partner should be an
equity or a salaried partner, Mr. Semple felt that it was
best that a new partner should have a share in the equity
from the first. The postponing of a decision in this regard
could give rise to considerable difficulties later on. Mr.
Semple also felt that it was a great mistake for a firm to be
other than as generous as it reasonably can to an
incoming partner. An incoming partner should have an
income which is sufficient to cover adequate life insurance
and pension arrangements, a reasonable contribution
towards capital and still allow him a spendable income
which is more than a spendable income of a qualified
assistant.
A prospective partner should ensure that there is^good
financial management and control in the firm. Mr. Scmple
rccommcndcd monthly financial statements including a
simple form of profit and loss account and balance sheet
showing also partners' drawings.
Legal Practice
Mr. Semple also drew attention to the changed tax
position of the young Solicitor who becomes a partner.
Most of the problem would be that he would be taxed on a
preceding year basis. This can be of benefit if profits are
rising but it may cause problems if profits have been
falling in the years before he becomes a partner. Mr.
Semple made reference to the distinction between being
taxed on an earnings basis or on a cash basis which was
further elaborated by Mr. Murray in his talk on Solicitors
taxation.
Finally under the heading of Income, Mr. Semple
drew
reference to the importance of having proper professional
indemnity insurance and also other general insurance for
the partnership assets.
2. Job Satisfaction.
Under this heading, Mr. Semple dealt with five major
matters:
(i) The nature of the work of the firm. Whether or not
the firm is a group of individual practitioners each
dealing with a wide range of areas or whether there
was a greater or lesser extent some specialisation and
departmentalisation in the firm may effect the
possibilities and progress of the practice in the future.
In the larger towns and cities, specialisation is
nowadays the more effective way of dealing with
clients problems.
(ii) How decisions are made in the firm. Mr. Semple
regarded this as the most important aspect of the
organisation of the partnership team and
recommended that some machinery be established
among partners for the making of decisions even if
this only consists of an informal arrangement e.g.
regular partnership lunches where matters can be
discussed. For larger firms, more formal procedures
may be appropriate.
(iii) StaíT morale and pleasant working conditions. Mr.
Semple highlighted the need to strike a balance
between over-plush surroundings that may scare
clients off and old fashioned, dirty offices which may
be indicative of the way the present partners' minds
work in this regard.
(iv) Good organisation. Mr. Semple stressed the
importance of an efficient system of storage and
retrieval of documents such as title deeds, or wills
etc. and of the efficient organisation of typing
sernccs.
(v) Hobdays. Mr. Semple said that it was the custom in
his part of the world to give four weeks holidays plus
public holidays.
3. Capital
Mr. Scmplc first mentioned the items which required to
be financed to allow Solicitors' business to be carried on
and the way in which the amount of the finance required
can be reduced. He said that the general practice