Trends in Partnership Structures
Source: CPA Practice Management Forum
Highlights from an interview with Allan Koltin, CEO of PDI Global, Inc., Chicago:
- In general partners today are expected to be more accountable for achieving performance goals. Still, many firms are unable to get their partners to be accountable.
- Partners are leaving national firms and becoming partners in local and regional firms. As a result we have seen increased “two-tier” partnership structures. Most of the top 100 firms have them. It allows lateral transfers as income partners who may become equity partners if things work out.
- Income v. equity partnership:
- Income partners sometimes make a small capital investment.
- Some income partners receive retirement pay often equal to one year’s annual income.
- Income partners who have made small equity investments may have commensurate voting rights. Their exposure on firm liabilities should also be commensurate with the amount of capital, if any, invested.
- Income partners (lateral transfers) sometimes have higher compensation than equity partners because firms are willing to pay for their talent and potential.
- Another classification of partner is “contract partner.” This designation is usually reserved for partners about to retire, perhaps as part of a merger agreement. They generally no longer have equity and may be receiving retirement payments.
- Part-time partners are also on the rise. This category helps promote work/life balance and keeps 65-year-olds in the firm.
- Firms are increasingly keeping partner compensation confidential, especially at larger firms, thus avoiding discord from invidious comparisons. This practice is sometimes engendered by lateral transfers.
- The complexity of new partnership structures has made comparisons of income per partner more difficult to interpret.
From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, November 2007, p. 15.
Measuring CPA Leadership Effectiveness |
Full Service Real Estate Investment and Mortgage Finance. |