WHILE MANY law firms wait for the bedding down of the national profession before seriously considering the option of incorporation, Raj Lawyers expects to be running as a corporation within the next couple of months.
The firm has been provided with the required documentation by its accountants and advisers, and is now going through the formalities. However, incorporation has been a year-long process, which mostly consisted of finding the right corporate model for the firm.
“The models that I’ve seen are still really about the benefits for the proprietors and I was looking for a model that gave a benefit to everybody,” managing partner Niren Raj said. “The main reason we wanted to incorporate was that the current partnership structure is archaic, it’s hierarchical, and one of the main features of incorporation is that you can actually have employee share schemes that are workable.”
The model will enable an employee share scheme that is “much more efficient” than the traditional bonus-based scheme and will allow certain employees to participate in the business. The benefit for the proprietors is greater buy in from employees.
Raj found the model he wanted by talking to advisers and accountants, and looking at models implemented by law firms that had already incorporated. He also spoke to a number of firms that had made the conversion, but then reverted back to a partnership.
“The difficulty in a partnership is how do you share with non-equity shareholders, how do you share the benefits with non-equity parties?” he said.
While there has not been a negative response to the concept of incorporation within the office, neither have people been “jumping up and down and saying ‘what a great initiative’”. Raj believes this will change once there is a practical application of the model.
“Employers can talk about a lot of initiatives, but unless they actually make a difference to a lawyer’s life, there’s a certain amount of ambivalence,” he said. “For us, this is about following through on what we’ve been talking about for years.”
The process of becoming an incorporated practice will involve several administrative changes, from accounting methods to letterheads to up-skilling staff to understanding the administrative differences. “There are significant costs,” he added.
But more significant will be the task of selecting shareholders in the business. “That’s a fundamental change.”
“I’ve been trying to create a different model since I set up this business,” Raj said. “That model has always been about, how do you share with people that don’t have a capital investment? How do you provide a positive benefit to them from both a pecuniary basis and also an ownership basis?
“For me, just to get this model is another step in trying to find that utopian concept.”