Value of Nonequity Partners

Source: Partner’s Report—the Monthly Update for CPA Firm Owners

Most nonequity partnerships are offered as a method of transition from manager or supervisor to partner. Some firms use it to effect partial retirement of partners, or for administrative personnel and marketing directors.

Nonequity partners sometimes serve on committees (including management and executive committees) and vote on firm decision matters.

Benefits (and problems) of a nonequity partnership, as reported by selected firms include:

• It is important for retention and succession.
• It may help retain professionals in the process of developing client bases until they are ready for full partnership.
• Eases the transition to full partnership.
• Allows firms to elevate roles of senior administrative personnel.
• Can be used as part of a performance compensation program.
• In a merger, it can be used to transition partners of the merged-in firm into partnership.
• Some states do not permit nonequity partnerships.

From Partner’s Report—the Monthly Update for CPA Firm Owners, April 2007, p. 1. 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.