An attorney worked for 10 years with a prestigious law firm and finally made partner. Recall in the movies when a person makes partner it is a celebratory event. But, this attorney is in the market to purchase a home. Had she purchased the home before she made partner she would have been approved for her loan. Now, having made partner per the Lending Rules she is self employed and needs to wait 2 years before she can qualify for a mortgage loan. Am I the only one that thinks we are penalizing success? Partners in a law firm are the same as partners in any other business - they personally are liable for the business' debts and entitled to its profits. The "liable for its debts" bit has led to the development of limited liability partnerships in some countries, where the members are somewhat protected because there is a limit on their liability similar to the protection for shareholders in a limited company who are only liable to the extent of their shares if the business gets into trouble.
The law firm's partners (owners) may employ other lawyers who are not partners (and who therefore don't share in the profits: they get a salary and maybe some bonuses the same as anyone else employed in any kind of business).
Firms are looking for a lot of things in potential partners -- intelligence, thorough knowledge of the law, quickness, common sense, solid client relationships, a good business sense, stability (in both your personal and professional life) and, in the case of big firms, absolute dedication to the firm and your work. Rainmaking ability is not to be underestimated, and at many firms, is an absolute prerequisite to joining the partnership ranks. In terms of numbers, look at it this way: at the very largest law firms, 100-200 associates might start at the firm as first year associates. By the time associates reach their eighth year (the first year when most associates are up for consideration for partner), there will only be maybe 15 or so of those original 100-200 remaining, plus maybe a few laterals, due to attrition and as a result of reviews where someone was asked to leave or told that that associate was not on the partner track. (By the way, though it is kept quiet, it is not at all unusual for associates to be asked to leave a firm. They are usually given transition time to find a new job so as not to blemish their resumes.) In a very good year, perhaps 10 or so associates will be invited to join the partnership -- less at some firms. Off of the top of my head, I'm thinking of three big NYC-based firms that made 7, 7 and 5 new partners last year.
So, the attorney with 8 years as an employee qualifies for a mortgage loan. The same attorney who one year later is now a partner-- does not qualify. Interesting.(The information about partners in a law firm was taken from various Google sites--the real life example is mine)
Doug Jones
Mortgage Magic NMLS 286668
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