Partnership structures in law firms have shifted significantly over the past two decades. According to Am Law 200 data, the percentage of equity partners has been declining, while non-equity roles continue to rise. In fact, in 2025, 87 of the 100 largest firms have adopted a non-equity partnership model. But what's driving this shift? This guide breaks down everything you need to know about the distinctions between equity and non-equity partnerships, helping you make the right choice for your practice.
What is an Equity Partner
An equity partner holds an ownership stake in a law firm. These partners contribute capital to the firm and, in return, receive a share of the firm’s profits and losses based on their equity percentage. Instead of earning a fixed salary, they participate directly in the firm’s financial performance through profit distributions.
Equity partners are typically involved in major firm decisions through their voting rights, helping shape the firm’s strategic direction. They also bear personal liability for the firm’s performance, sharing both its risks and rewards.
What is a Non-Equity Partner
A non-equity partner does not hold an ownership stake in a law firm. These partners receive a fixed salary and may also earn performance-based bonuses, but they do not participate in profit distributions. Unlike equity partners, they are not required to contribute capital to the firm.
Non-equity partners typically have limited or no voting rights in major strategic decisions and do not bear personal liability for the firm’s debts. Many law firms use this role for experienced lawyers who prefer predictable compensation or as a transitional step toward equity partnership.
Equity vs. Non Equity Partner Difference in Roles
Equity partners serve as firm owners and business leaders. They’re deeply involved in the firm’s management that directly impacts firm trajectory. These partners are often responsible for planning business development about practice areas, major expenditures, and personnel.
Non-equity partners focus primarily on legal work and client service without the administrative burden of firm ownership. Their role emphasizes their legal expertise and client development rather than business management. They handle cases and client relationships but have limited input on firm management decisions.
Equity vs Non-Equity Partner Salary Difference
According to BCG Attorney Search’s 2024 Partner Compensation Report, there is no straightforward answer to a law firm partner’s salary, as it is influenced by numerous factors such as location, practice area, and firm size. At midsize firms, the average compensation for a non-equity partner is about $275,000 per year, while equity partners average around $633,000 per year.
The main difference lies in the compensation model:
- Equity partners receive compensation through profit distributions based on their ownership percentage. Their earnings fluctuate with the firm's performance, offering potentially higher rewards during successful periods but also bearing the risk of reduced income during challenging times.
- Non-equity partners receive a fixed salary, often supplemented by bonuses tied to individual performance, billable hours, or business generation. This provides more predictable income but typically caps earning potential compared to successful equity partners.
Equity vs. Non Equity Partner: Main Differences
1. Ownership
Equity partners hold a percentage of ownership in the firm, making them part owners of the business. Non-equity partners, on the other hand, have no ownership stake or claim to the firm’s assets.
2. Decision Making Authority
Equity partners have voting rights on major firm decisions like strategic direction, partner admissions, and financial matters. Non-equity partners have limited or no voting rights on these ownership-level decisions.
3. Liability and Risk
Equity partners bear personal liability for the firm’s debts and business obligations. If the firm faces financial challenges, they are directly affected, and their capital contributions may be at risk. Non-equity partners, however, have no financial liability for the firm’s obligations beyond their own professional conduct, and their personal assets are typically not at risk.
What are Their Benefits?
Understanding the benefits of each partnership model can help clarify their impact on your practice.
Equity Partnership Benefits
- Higher earning potential. Direct participation in firm profits allows your income to grow as the firm performs well.
- Greater control. As owners, equity partners have voting rights and a say in the firm’s major strategic decisions.
- Long-term Investment. An ownership stake creates asset value that can be sold or transferred upon retirement.
Non Equity Partnership Benefits
- Focus on legal practice. Partners can concentrate on client work and relationships without the burden of firm management responsibilities.
- Reduced financial risk. They earn a stable salary without the financial risk associated with firm debts or business obligations.
- Retention. Firms can reward and retain top talent with higher compensation and a partner title, without requiring full ownership.
Which is Better For Law Firms: Equity or Non-Equity Partners?
There is no one-size-fits-all answer. The right partnership structure depends on your firm’s size, location, and practice area. Evaluating the benefits and challenges of each model can help determine which best aligns with your goals.
Equity partnerships remain the more rewarding path when a firm performs well. As part-owners, equity partners take on leadership responsibilities and directly influence the firm’s success. If you have the experience and business acumen to run a firm effectively, this is a path to pursue.
The rise of non-equity partnerships is often driven by their ability to offer a path to partnership without a capital contribution. This structure allows a firm to recognize and reward top talent with increased compensation and a prestigious title. It's an excellent way to retain valuable lawyers who may not be ready for or interested in the full responsibilities of equity ownership.
Ultimately, both partnership structures require more than excellent legal work. Success hinges on a partner's ability to attract clients and grow the business. Each firm's circumstances are unique, and choosing the structure that allows the business and its people to thrive will lead to the most rewarding results.
Frequently Asked Questions
Are a Non-Equity and Equity Partner the same thing?
No. While both hold the title of “partner,” the key difference lies in ownership. Equity partners own a stake in the firm, while non-equity partners do not.
Can a non-equity partner become an equity partner?
Yes. Many law firms use non-equity partnership as a stepping stone to equity partnership.
Do all law firms have both equity and non-equity partners?
No, not all law firms use both partnership structures. Smaller firms often have only equity partners, while some larger firms may operate with both types, or even additional partnership models.
