March 4, 2015 – So, you want to expand your practice, but is adding one or more partners the right approach for you? To better understand the pros and cons, start by considering your own self-interest in adding a partner, says Angela Campion of Campion Law LLC.

Are you considering economies of scale? There may be opportunities to “save money on overhead by sharing rent and utilities, and the cost of an associate or an assistant with one or more other owners,” says Campion, speaker at the State Bar of Wisconsin PINNACLE Wisconsin Solo & Small Firm Conference.

Perhaps, it’s the potential for collaboration that comes with having a partner – someone with whom you can share information, speak freely about client matters, or just bounce ideas off.

Other benefits may include “the potential to attract larger clients, or the ability to add a complimentary practice area to your own,” says Campion. In either case, adding a partner could help you to become “the go-to boutique firm for a certain area” while adding value by having “someone within your practice that you can refer to if it’s an area outside your specialty.”

Then again, maybe it’s the camaraderie, says Campion. It can be lonely, even frightening at times, being a solo practitioner. “By having someone else in the boat with you, there’s less fear that it might sink.” You may find comfort in “just having someone else to share the risk with.”

Of course, there can be disadvantages to having a partner. The loss of flexibility and freedom, being one of the biggest drawbacks, says Campion. “One of the nicest things about being a solo practitioner is that you’re in charge. By adding a partner, you will now share financial information, your conflicts of interest will potentially increase, you might have personality or habits that don’t necessarily match one another, and you will have to deal with that as joint owners of the business.”

Next Steps: Business Structure and Ownership Agreement

“Once you have decided to add a partner or multiple partners, there are some very specific administrative tasks that need to take place,” says Campion. One of the first decisions you will need to make is the structure of your business.

Do you plan to form a simple partnership? Or will you file documentation at the state level to be a limited liability partnership, limited liability company, or a service corporation? In that case, you will need to file specific documents with the state Department of Financial Institutions.

You will also need to file a limited liability legal practice registration statement, “an annual requirement where you have to substantiate your malpractice coverage.” Moreover, says Campion, “you will also want to look into malpractice coverage and make sure you increase that appropriately.”

Finally, you should be sure to set up an ownership agreement. “It’s very important in that agreement to set forth what your initial contributions are, what your management responsibilities will be, how you are sharing profits and losses, and then what your exit strategy is – so upon death or disability or retirement or loss of license, how you are going to handle the transition away from joint ownership.”

Where to Turn for More Information

“There are lots of great resources at both of the law libraries in Wisconsin,” says Campion. “In addition, the State Bar has several of those lovely brown binders that have good forms as well as analysis on the different types of ownership agreements that you might have depending on the entity that you choose.”

The forms are a “good starting point,” but be sure to “tailor them exactly to what you and your other owners have agreed upon, in terms of how you will share the profits and losses, the management responsibilities, and the transition of ownership as one of you or more of you decide to exit the business.”