Editing Partnership (section)

==Partner compensation==
Partner compensation will often be defined by the terms of a partnership agreement. Partners who work for the partnership may receive compensation for their labor before any division of profits between partners.<ref>{{Cite web |title=Which terms should be included in a partnership agreement? |url=https://www.investopedia.com/ask/answers/041015/which-terms-should-be-included-partnership-agreement.asp |access-date=2024-01-30 |website=Investopedia |language=en}}</ref>

===Equity vs. salaried partners===
In certain partnerships of individuals, particularly [[law firm]]s and [[accounting firm]]s, '''equity partners''' are distinguished from '''salaried partners''' (or '''contract or income partners'''). The degree of control which each type of partner exerts over the partnership depends on the relevant [[partnership agreement]].<ref>{{cite web|last1=Serrill-Robins|first1=Mira|title=Equity vs. Non-Equity Partnerships|url=https://www.lexisnexis.com/legalnewsroom/lexis-hub/b/careerguidance/archive/2010/03/15/equity-vs-non-equity-partner-what-the-difference-means-to-you.aspx|website=LexisNexis Legal Newsroom|publisher=Relx Group|access-date=22 September 2017|date=15 March 2010}}</ref>
* An equity partner is a part-owner of the [[business]], and is entitled to a proportion of the distributable [[Profit (accounting)|profits]] of the partnership.
* A salaried partner who is paid a [[salary]] but does not have any underlying ownership interest in the business and will not share in the [[dividend|distributions]] of the partnership (although it is quite common for salaried partners to receive a bonus based on the firm's profitability).

Although individuals in both categories are described as partners, equity partners and salaried partners have little in common other than [[joint and several liability]]. In many legal systems, salaried partners are not technically "partners" at all in the eyes of the law. However, if their firm holds them out as partners, they are nonetheless subject to joint and several liabilities.

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) and, upon distribution of profits, receive a portion of the partnership's profits proportionate to that share. In more sophisticated partnerships, different models exist for determining either ownership interest, profit distribution, or both. Two common alternate approaches to distribution of profit are "[[lockstep compensation|lockstep]]" and "[[Merit pay|source of origination]]" [[remuneration|compensation]] (sometimes referred to, more graphically, as "eat what you kill").<ref name="clark">{{cite web|last1=Clark|first1=Norman|title=Better carrots for partner compensation strategies|url=https://www.lexology.com/library/detail.aspx?g=b1849e63-a519-4da7-979c-0753525fef6b|website=Lexology|access-date=22 September 2017|date=30 September 2016}}</ref>
* 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 sometimes referred to as a plateau. The length of time it takes to reach the maximum is often used to describe the firm (so, for example, one could say that one firm has a "seven-year lockstep" and another has a "ten-year lockstep" depending on the length of time it takes to reach maximum equity).
* Source of origination involves the compensation of profits according to a formula that takes into consideration the amount of revenue and profit generated by each partner, such that partners who generate more revenue receive a greater share of the partnership's distributed profit.

===Law firms===
The source of origination compensation is rarely seen outside of law firms. The principle is simply that each partner receives a share of the partnership profits up to a certain amount, with any additional profits being distributed to the partner who was responsible for the "origination" of the work that generated the profits.<ref name="clark"/>

British law firms tend to use the lockstep principle, whereas American firms are more accustomed to source of origination. When British firm [[Clifford Chance]] merged with American firm [[Rogers & Wells]], many of the difficulties associated with that [[merger]] were blamed on the difficulties of merging a lockstep culture with a source of origination culture.<ref>{{cite news|last1=Becker|first1=Amanda|title=Law firm merger activity picks up|url=https://www.washingtonpost.com/wp-dyn/content/article/2010/07/02/AR2010070204907.html|access-date=22 September 2017|newspaper=Washington Post|date=5 July 2010}}</ref>