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. For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to The term is used in contra-distinction to a salaried partner who are paid a salary, but do not have any underlying ownership interest in the business and will not share in the distributions of the partnership (although it is quite common for salaried partners to receive a bonus based upon the firm's profitability). A salary is a form of periodic payment from an Employer to an Employee, which may be specified in an Employment contract. Dividends are payments made by a Corporation to its Shareholder members

Although they are both regarded as partners, in legal and economic terms, equity partners and salaried partners have little in common other than joint and several liability. Where two or more persons are liable in respect of the same liability in most Common law legal systems they may either be jointly liable or ^[1] The degree of control which each type of partner exerts over the partnership depends upon the relevant partnership agreement. Articles of Partnership is a voluntary Contract between two or among more than two persons to place their Capital, labor and skills and corporation in

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. A law firm is a business entity formed by one or more Lawyers to engage in the practice of law Accountancy or accounting is the measurement statement or provision of assurance about financial information primarily used by Lenders managers,

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. Clifford Chance LLP is the largest Law firm in the world both by number of lawyers and revenue and a component of the UK's " Magic Circle " of leading law Rogers & Wells was a New-York based international Law firm founded in 1873

See also

• Partnership
• Law firm
• Partner (business rank)

Footnotes

---

© 2009 citizendia.org; parts available under the terms of GNU Free Documentation License, from http://en.wikipedia.org
Dapyx Software network: MP3 Explorer | Ebook Manager | Zenithic