Professional service firms should regularly review their equity and ownership structures to ensure that they are still fit for purpose and not trapped in outdated historical or traditional models. In order to offer fair protection and career planning for all owners as partners are promoted, develop and ultimately retire, the traditional partnership model has at times become unwieldy and rigid firms may need to consider changing to a more corporate structure. In many cases, the model continues to have a short-term financial focus with an accent mainly on the current year’s profitability, with little investment for the future. The imperative is for a structure that offers greater flexibility and that allows for a longer-term view.
We can help with the choice of a fair and flexible structure depending on
- The firm’s strategy for survival and prosperity that may require growth or diversification and therefore funding to a greater extent than they can manage internally.
- The desire to keep ownership tight and restricted and to avoid dilution in the promotion process
- The desire for greater flexibility and the avoidance of complexity and bureaucracy
- Ease of arrangements when partners come and go (e.g. the need to deal with share transfers etc as and when shareholdings change)
- Possible taxation issues
- The possibility of shareholders/partners being based in jurisdictions other than that of the home-base
- Regulatory restrictions
- The overall ethos of the firm