LLP Partnership Agreement: Template for Professional Firms (Law, Accounting, Medical)

Updated April 2026. The LLP structure protects partners from each other's malpractice while allowing all partners to actively manage the firm.

LLP vs LP vs LLC vs General Partnership

Feature	General Partnership	LP	LLP	LLC
Liability protection	None	GP: none; LP: limited	Partners protected from others' malpractice	Full personal asset protection
Management	All partners	GP only	All partners	Members or managers per operating agreement
State restrictions	None	None	Many states limit to licensed professions	Some professions require PLLC
Self-employment tax	All partners	GP only	All partners	Members (unless S-corp election)
Best for	Informal, short-term	Investor/operator split	Professional service firms	Most businesses

Partner Compensation Models

Lockstep System

Partners advance through predetermined income tiers based on years of seniority, regardless of individual performance. Used by elite law firms (Wachtell, Cravath). Promotes collaboration and long-term thinking. Loses top rainmakers to eat-what-you-kill competitors.

LOCKSTEP COMPENSATION: Compensation tiers based on years as equity partner: Years 1-3: [XX]% of average equity partner income Years 4-6: [XX]% of average equity partner income Years 7-10: [XX]% of average equity partner income Years 11+: 100% (full equity partnership) Annual compensation pool is determined by the Executive Committee based on firm profitability. Individual tiers are applied to determine each partner's share of the pool.

Eat-What-You-Kill

Partners receive compensation based primarily on their own originations (client development credit) and billing credit. Common in mid-size law and accounting firms. Rewards high performers but discourages collaboration and client sharing.

EAT-WHAT-YOU-KILL COMPENSATION: Compensation = (Origination Credit x [XX]%) + (Working Credit x [XX]%) + Base Guarantee ORIGINATION CREDIT: Revenue from clients a partner personally originated and maintains the primary relationship with. WORKING CREDIT: Revenue from billable time a partner directly performs (regardless of who originated the client). BASE GUARANTEE: Each equity partner receives a minimum annual guarantee of $[AMOUNT], payable monthly, regardless of performance. Annual true-up: In Q1, prior year credits tallied and final compensation adjusted. Partners who generated less than guarantee repay the overage from next year's draw.

Points-Based System

Partners accumulate points for multiple contributions: client origination, billing, firm governance, training associates, cross-selling. Compensation is proportional to total points. Balances individual performance with firm-wide contributions.

POINTS-BASED COMPENSATION: Point allocations per year: Client origination credit: up to [XX] points Annual billings credit: [1 point per $X,XXX billed] Firm governance roles: [XX] points per role held Associate mentoring: [X] points per associate supervised Cross-selling referrals: [XX] points per $[XX,XXX] in referred revenue Compensation = (Partner Points / Total All Partner Points) x Annual Profit Pool Points are reviewed and adjusted annually by the Compensation Committee. Partners who drop below [X] points in any year may be transitioned to non-equity status.

Partner Admission and Advancement Tracks

PARTNER TRACK: NON-EQUITY PARTNERS: Attorneys/professionals who carry the title of "Partner" but have not yet been admitted to the equity pool. They: - Receive a fixed salary (not a profit share) - Do not contribute capital - Have no voting rights on firm governance - Serve a defined track period (typically 2-3 years) EQUITY PARTNER ADMISSION: After [X] years as Non-Equity Partner, eligible professionals may be nominated for equity partnership by: 1. Sponsoring equity partner submits written nomination 2. Executive Committee evaluates: originations, billings, client relationships, leadership, cultural fit 3. Vote of equity partners (requires [2/3] majority) 4. Capital contribution of $[AMOUNT] (may be financed by firm) CAPITAL BUY-IN: New equity partners contribute $[XX,XXX] to $[XXX,XXX] (financed over [5] years at [prime rate]). Departure before buy-in completion triggers capital repayment on agreed schedule.

State-by-State LLP Availability

State	LLP Available	Restricted to Professions?	Liability Scope
California	Yes	No restriction	Partners protected from others' malpractice and negligence
New York	Yes	Licensed professionals only	Full shield - protects from all co-partner liability
Texas	Yes	No restriction	Full shield LLP
Delaware	Yes	No restriction	Full shield LLP
Florida	Yes	No restriction	Full shield LLP
Illinois	Yes	No restriction	Full shield LLP

FAQ

What is the difference between an LP and an LLP?

An LP has two classes of partners: general partners with unlimited liability and management authority, and limited partners with limited liability but no management rights. An LLP has partners who all manage the business but are protected from personal liability for other partners' malpractice. LLPs are typically used by professional service firms where all partners practice actively.

Who uses an LLP structure?

LLPs are primarily used by licensed professional service firms: law firms, accounting firms, medical and dental practices, architecture firms, and engineering firms. Many states restrict LLP status to these professions. The key benefit is that partners are not personally liable for the malpractice of their co-partners, while still being active co-managers.

What are the compensation models in an LLP?

Professional firms use four main compensation models: (1) Lockstep - partners advance through seniority tiers regardless of individual performance; (2) Eat-what-you-kill - compensation based on individual client billings and originations; (3) Modified hatch - hybrid with base lockstep plus performance bonuses; (4) Points-based - partners accumulate points for origination, billing, governance, and mentoring.

Agreement Builder Limited Partnership What to Include Buyout Clause

Professional LLP Formation

LLP formation requires state registration and compliance with professional licensing rules. Have an attorney experienced in professional firm structures review your agreement.

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