Value of Nonequity Partners

Source: Accounting Office Management & Administration Report

Benefits to firms of nonequity partners:

• Retention of key people.
• Test people on a partnership path and lengthen their training.
• Phase out retiring partners.

Investigate the state laws controlling the number of partners who must be CPAs.

AOMAR’s recent survey, CPA Firm Strategic Outlook, asked firms how they incorporate nonequity partners. Most firms use it as a way to phase in new partners. The following table shows the results:

In 18.7 percent of the respondent firms, nonequity partners serve on committees, and in 14.4 percent they serve on management and executive committees. Some have voting rights.

Most firms say the nonequity program is working well. It has helped retain people who have not yet developed a client base. It has given younger people the opportunity to become “partners” earlier, then grow into equity positions. It also provides a way to increase the stature of administrative people. Firms with as few as three full-time equivalents plan to use nonequity partnerships as part of a performance compensation plan.

From Accounting Office Management & Administration Report, July 2007, p. 1. See Why Nonequity Owners Can Enhance Your Firm’s Results. For subscription information contact Institute of Management & Administration, Inc., 3 Park Avenue, 30th Floor, New York, NY 10016-5902. One-year subscription $399. 212-244-0360, [email protected]. For the complete article, click here.