The Era of the Non-Equity Partner Is Upon Us

320%. That’s how much the number of non-equity partners at INSIDE Public Accounting Top 100 firms — excluding Big 4 — has grown over the past 15 years. Equity partners at these firms, however, have grown only 85% in that same time period. The IPA Top 100 minus Big 4 starts at RSM with $3.7 billion in revenue and ends with a Wayne, PA firm called Global Tax Management with $48.8 million.

IPA published a whole thing about it that explains non-equity partnerships are a good way to keep people who may not be great at the hand-greasing of traditional equity partners and definitely not just a consolation prize for the awkwards.

The accounting profession is adding far more nonequity partners to its ranks than equity partners, which means power is concentrated among fewer owners but stand-out pros are getting the opportunity for more responsibility, more autonomy and more money.

To give a real example of how this approach is working in their article about this trend at Top 100 public accounting firms, they spoke to Pennsylvania’s Kreischer Miller.

OK you know what, who cares. Close enough for horseshoes. Writes IPA:

For example, at Kreischer Miller of Horsham, Pa. (FY23 net revenue of $42.3 million), the number of nonequity partners has increased from 12% to 59% of all partners since 2019. The numbers represent a shift in thinking, says Christopher Meshginpoosh, who goes by the title of managing director because partners are called directors at his firm.

At Kreischer Miller, equity directors are more involved in bringing in business than nonequity, but beyond that, there’s very little difference between the two. Both types serve clients the same way, sign reports, lead industry groups or service lines, and serve as thought leaders. Nonequity directors don’t vote, but there aren’t many issues that need to be voted on anyway, Meshginpoosh said.

The issue of non-equity partners appeared on our radar in earnest about ten years ago. See: Let’s Discuss: Non-Equity Partners in Accounting Firms. One figure thrown out in that 2015 article is a fact from CPA consultant and industry-leading Rosenberg Survey founder Marc Rosenberg:

Nearly half of multi-partner firms now have non-equity partners, almost double the number of 10 years ago.

So he’s saying in 2005 only about a quarter of multi-partner firms had non-equity partners, got it. Another item we learn from Marc is that prior to 2015, it wasn’t entirely clear that the AICPA Code of Conduct even allowed this practice. Despite the lack of clarity at that time, “firms by the thousands” were embracing the non-equity partner concept. No worries though, the AICPA revised the Code of Conduct on December 31, 2014 after which time it read:

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.

This conversation will probably be relevant as we move forward into the PE-owned future of public accounting, let’s shelve it for now and revisit later. Is the traditional CPA partner dead?

Accounting Firms Embrace Nonequity Partnerships: A Win-Win for Talent and Growth [INSIDE Public Accounting]

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