The 1980s were boom years for solicitors.

Firms expanded rapidly and there was a perceived shortage of able solicitors.

In an attempt to retain the services of their young and ambitious staff, who were becoming significantly more mobile in the market place, many firms adapted their organisational structures and introduced or formalised the position of salaried partner.The boom years may have ended but the position of 'salaried partner' remains.

It still acts partly as a mechanism to retain ambitious young staff on their way up to equity partner but, additionally, as an end in itself, providing recognition to staff who, because of the recession, might not move any higher.

The question is, what exactly is a salaried partner? To the outside world, they appear no different from equity partners, ie as names on the firm's notepaper.

The main difference between a salaried partner and an equity partner is simply that salaried partners receive fixed salaries rather than a share of the partnership's profits.

Salaried partners gene rally contribute no capital to the firm and play little role in the firm's management.In recognition of their subservient status and their lack of profit share, salaried partners customarily receive an indemnity from the equity partners in respect of the firm's liability to third parties.

The position of salaried partner therefore brings recognition, status and increased remuneration, but within strictly defined limits.Nowadays, a new factor has arisen which young, ambitious lawyers may wish to take into account when considering whether to accept the qualified recognition of salaried partnership.Until very recent times, the existence and extent of professional indemnity insurance has shielded equity partners from personal exposure when their firm is held liable to a third party.

In the last few years though, all professions have seen an explosion in the number and size of negligence claims made against them by former clients and solicitors have not been spared.

Such claims give rise to the prospect at some stage in the near future of a successful claim outstripping the insurance available and exposing equity partners to personal liability.The risk of this eventuality has increased with the escalating cost of non-compulsory top-up cover and hence, perhaps, a reduction in the amount of cover purchased.

Prospective salaried partners may wish to ask what their position would be in these circumstances.The size of some recent claims must bring into question the value of indemnities given by equity partners.

If a successful claim is such that it will outstrip the insurance available, then it is not inconceivable that it may also outstrip the combined personal assets of the equity partners.

Would the salaried partners then be liable?Under common law and under the provisions of the Partnership Act 1890, each partner in a firm is liable in respect of the partnership's liabilities to third parties.

The Partnership Act, however, effectively excludes salaried partners on the basis that, by definition, they are not partners: they receive a salary and not a share of profits and/or losses.

The position of salaried partners would therefore seem to be protected by the law, perhaps rightly, given their subservient role within partnerships.Unfortunately, however, the provisions of the Partnership Act go further and provide that in addition to partners (at law) being liable to third parties, individuals who are 'held out' as partners will also be liable in respect of the partnership's liabilities to third parties.

By the general practice of showing salaried partners on the firm's notepaper or letterhead as partners in the firm, they are held out as partners to all third parties who receive letters from the firm.Strictly speaking, the third party in question must show that they relied on the 'holding out'.

Whilst there is little legal authority on the question of reliance, the onus on the third party to show reliance is easily discharged.

The likelihood is that named salaried partners will therefore be held personally liable.Personal liability will extend to all the salaried partner's assets.

In the 'worst case scenario' of insufficient insurance cover and equity partners who have lost everything, this may mean bankruptcy and a career destroyed.

In an increasingly litigious environment, this may be a consideration ambitious young lawyers will want to take into account when offered the qualified recognition of salaried partnership.