*Non-Equity Partners: Are They Legit?
Source: The Marc Rosenberg Blog
The following includes excerpts, reproduced with permission, from a blog entry by Marc Rosenberg.
Nearly half of multi-partner firms now have non-equity partners, almost double the number of 10 years ago. Yet every year I receive questions from firms wanting verification that this practice is blessed by the AICPA and its Code of Conduct.
Prior to 2015, as corroborated by the AICPA staff, the Code of Conduct was not clear on this issue, even though firms by the thousands had adopted the non-equity position.
But the entire Code of Conduct was overhauled December 31, 2014. Section 0.400.37 reads as follows:
Definition of a partner. A proprietor, shareholder, equity or non-equity partner . . . or any individual who is held out by the firm to be the equivalent of any of the aforementioned.
Why CPA Firms Use the Non-Equity Partner Title
- A way to keep the bar high for equity partner.
- A partner-in-training program.
- A way to recognize the stature and contributions of highly valuable managers who meet most but not all partner criteria.
- A staff retention tactic.
- For lateral partner hires, to provide both sides with an opportunity to test each other out.
- A title for merged-in retirement-minded partners and retired partners working part time.
Non-Equity Partnership Features
- Attend partner meetings.
- Compensation determined the same way it was when the person was a manager — management's discretion.
- Access to the firm's financial statements and performance metrics with one exception: compensation of equity partners.
- Equity partners should never tell clients and staff that someone is a non-equity vs. an equity partner.
- A small but growing trend is to award partner buyout payments to non-equity partners, albeit on a much lower scale than for equity partners.
For the complete entry, read “Can Non-Equity Partners Hold Themselves Out as ‘Partners'?”
From The Marc Rosenberg Blog, November 9, 2015, blog.rosenbergassoc.com.