Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMCB

Q. I am a partner in a 14-attorney firm in Chicago's western suburbs. We have five equity partners and nine associates. We are currently leasing office space that we have outgrown. As we are approaching the end of our lease we are considering buying our own building. We would appreciate your thoughts.

A. I find that many firms have difficulty dealing with all of the moving parts of buying and building out a building and the distractions and time that it takes away from the law practice. Owning your own building can provide numerous financial and tax advantages and If you decide to go this route hire professionals to help expedite the process and a real estate building management company to manage the building when it is completed.

I strongly suggest that you create a separate entity that will own the building and separate building ownership from the law firm ownership structure. I suggest that participation in ownership of the building be optional for law firm equity partners that want to invest in the building.

It is hard enough for new partners to fund their capital accounts or buy-ins without having a mandatory building buy-in. Recently I have seen a few merger and lateral partner opportunities go south as a result of buildings, real estate, and mandatory buy-ins.

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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.