Recently it has been reported that disputes over law firm partners’ capital in their firms have increased.1 Regardless of whether this constitutes a trend that will continue, what appears to be an assured constant is law firm partners’ perennial confusion and consternation concerning the nature of law firm capital and what happens to one’s capital upon departure. Indeed, we have often experienced confusion and disagreement among sophisticated lawyers and law firms concerning what capital is and how it is calculated.

In this column2 we explore the nature of capital, how capital grows and shrinks, and how it is calculated and returned to former law firm partners pursuant to typical law firm partnership agreements.

What Is Law Firm Capital?

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