What’s the Difference Between a Low-Equity and a Non-Equity Partner? - Rosenberg Associates (2024)

FAQs

What’s the Difference Between a Low-Equity and a Non-Equity Partner? - Rosenberg Associates? ›

What's the Difference Between a Low-Equity and a Non-Equity Partner? Non-equity partners don't usually have the same “rights” that equity partners have: a vote, capital buy-in, goodwill-based retirement benefits, obligation to pay retirement benefits to others, legal liability and a share in the profits.

EQUITY VS NON-EQUITY PARTNERS

An equity partner is an owner of a law firm. Non-equity partners do not have the same job security as equity partners. Most non-equity partners receive a salary instead of partnership distributions. Depending on how the firm is set up you maybe paid by W2 or K1 schedule.

From an investor's perspective: Equity investments offer higher potential returns with greater risk, while non-equity investments provide more stability and lower returns. The choice depends on your risk tolerance and financial goals. Diversification is often advisable to balance risk and reward.

The market views equity investments in alliances as more valuable than toeholds taken by potential acquirers without a product market relationship. Non-equity alliances, on the other hand, do not involve the exchange of equity stakes.

Income partners often have a guaranteed base salary, providing them with less earnings risk than equity partners have. Because most compensation programs offer non-equity partners a share of net income, their focus on profit performance is heightened.

Non-equity partners don't have to buy-in, but also don't have an ownership stake in the firm. Non-equity partners often continue to receive a salary as their compensation—instead of being paid based on firm profits.

$275K (Median Total Pay)

The estimated total pay range for a Non Equity Partner at Kirkland & Ellis is $206K–$384K per year, which includes base salary and additional pay.

Non-equity actors give up AEA membership benefits and often earn less money than their equity counterparts. When negotiating contracts, you are under no earning restrictions. You can work for as little or as much as you are willing to accept, creating a large variance in non-equity earnings.

Equity partners are paid in either a monthly or quarterly “draw” which is a distribution of the firm's profits over a certain period of time. This draw can be determined by a compensation committee, agreed to by fellow partners, or may be based on the performance of billable hours.

Benefits of equity

The equity partners of a growing and profitable firm can expect to take home an outsized share of the financial rewards. Holding equity also gives a partner a stronger voice in firm governance in the form of voting rights. Voting rights and partner compensation are often closely connected.

What is an example of a non-equity alliance? ›

In a non-equity alliance, two companies share resources and proprietary information. An example of this happening in real life is the relationship between Kroger and Starbucks.

A non-equity strategic alliance is created when two or more companies sign a contractual relationship to pool their resources and capabilities together. Learn more in CFI's Corporate and Business Strategy Course.

We define a non-equity alliance as a relationship between two or more companies, aimed at achieving a common objective by coordinating efforts, while each party retains its organizational independence, and no new equity entity or corporation is created.

For many firms, a non-equity partner is someone who carries a partner title but is not an owner of the firm. Some firms use the terms “principal” or “director” to describe the same function.

Some places refer to this position as an “income” or “non-equity” partner, distinct from the equity partnership. The firm issues K1 forms instead of W2s to these non-equity/income partners.

How much does a Non Equity Partner make in California? The average Non Equity Partner salary in California is $226,013 as of April 24, 2024, but the range typically falls between $189,755 and $271,700.

An equity partner is like a close ally who joins forces with you in your business journey. They invest their resources, be it capital, skills, or experience, in exchange for a share of ownership and profits. Equity partners don't hold “equity”, insofar as equity generally refers to a holding of shares or options.

An equity partner is an individual who holds an ownership stake in a business, with the most prominent example being a law firm. Equity partners have financial interest in the success of the firm because they share in the annual profits and losses, based on the equity percentage they own.

A partner who is entitled to a fixed share of partnership profits and, depending on the terms of any partnership agreement, may not be required to contribute to partnership losses. Non-equity partners may also have more limited voting rights than equity partners.

For many firms, a non-equity partner is someone who carries a partner title but is not an owner of the firm. Some firms use the terms “principal” or “director” to describe the same function.