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Partnership Investments

By Sheldon I. Banoff
April 27, 2007

With profits per partner continuing to rise, many attorneys have more discretionary income available for investment. In addition to investing directly in both traditional and nontraditional sources, some partners may choose to invest (either inside or outside their law firms) in opportunities that arise in the law firm setting.

For example, some clients may expect their law firms and other professionals to actively invest in their new activities (e.g., a stock or securities offering or hedge fund) as a sign of support. Or, a partner may obtain an investment opportunity from a third party (e.g., a financial adviser to a client, or the client himself); many partnership agreements provide that any investment opportunities made available to a partner by a client must be offered to and shared with other partners of the firm. Additionally, the law firm's leadership may believe that successful joint investments of monies will strengthen the institutional ties (and retention) of the firm's partners.

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