What is An Equity Partner
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.
Equity partners are also typically involved in the management and decision-making processes and may have a say in the strategic direction of the company. Equity partners will usually contribute assets (firm capital) to the business, in return for a percentage ownership and share in a portion of the company’s profits.
Equity vs. Non-Equity Partner Law Firm
It is not required to become an equity partner at a law firm; depending on the firm, there are other paths to become a partner. Many law firms have tiers of partnership.
Non-equity partners, also referred to as “income” or salaried partners, have the partner title but no ownership stake in the firm. These partners receive a fixed salary, which can vary depending on bonuses.
Some law firms also have a junior partner structure, allowing non-equity partners to work towards becoming equity partners over time. Junior partners will have performance targets they have to meet in order to become an equity partner. Learn more about all of the financial aspects of a partnership here.
