Making the partnership decision

Ask yourself — and your firm’s leaders — these essential questions.
By Cheryl Meyer

IMAGE BY GREMLIN/ISTOCK
IMAGE BY GREMLIN/ISTOCK

Deciding whether to pursue partnership in a CPA firm — a goal of many accounting graduates — can be an endeavor that requires much soul-searching. Young CPAs work for years and move up the ranks, inching toward their desired goal midcareer. Being a partner brings prestige, often financial gain, and the opportunity to have a major impact on the firm's future. But it has its downsides as well.

As CPAs get closer to becoming a partner — particularly an equity partner — tough questions can surface. Should they spend much of their savings on a partner buy-in? How many hours will they be expected to work? Can they envision being in business with the leadership currently at their firm? Do they want to be committed to the same firm for the foreseeable future? And if they decide not to become a partner, what's next?

For Chris Wittich, CPA, the decision was straightforward. He chose to become a partner at Boyum Barenscheer, near Minneapolis, in January 2020 because he wanted to have more of a say in the direction his firm was taking.

"I crave control and a voice in what's going on," Wittich said. "I have a lot of ideas about better ways to serve our clients or more efficient ways to operate the firm or better ways to manage a process." For him, becoming partner would give him a greater opportunity to put those ideas into practice.

But the financial commitment required to become an equity partner can cause some to decide against the role. Josh Alexander, CPA, left a job at a Dallas-based firm because he was apprehensive about the hefty required partner buy-in, which would have given him just a 5% stake.

"Instead of taking on that debt, I figured I could invest that into my own firm and have a 50% ownership stake," Alexander said. While the transition was tough, he founded his own Dallas-based firm that same month and later took on a partner, recently renaming his firm to Alexander & Williams LLC and accepting the title of "partner" as well.

Some CPAs decide not to become equity partners and instead choose to stay in their current roles or transition into other nonequity positions within their firm. For instance, Diane Brewer, CPA, senior manager at HeimLantz in Annapolis, Md., heads up the estate and trust department at the firm. She was offered the post as an owner but chose to remain in her current role for personal and family reasons. "It was an easy decision for me," she said. "I feel very comfortable in the firm, am respected, have acquired a good salary, and feel [my current role] wasn't prohibiting me from succeeding in what I want to do."

At many firms, CPAs who aren't sure whether they want to become a full equity partner can take on a transitional role. Many firms give CPAs an option to accept a role as a nonequity partner — a role that may have the title of "principal," "director," "shareholder," "income partner," or even "partner" — or a partial equity owner. These roles can allow CPAs to get a glimpse of what it is like to be a full-blown owner, even though everything about the firm's operations may not be fully disclosed to them. At most firms, CPAs can choose to remain in these roles or move on to become equity partners.

Grace McKoy, CPA, stepped up as a shareholder, or partial owner, at Anderson ZurMuehlen in Missoula, Mont., and hopes to become a full equity owner down the road. Currently, she owns 100 shares in the firm, compared to full equity partners who own 4,000 shares. McKoy always wanted to be a shareholder, so the choice to accept this partial ownership post two years ago was an easy one for her. But she is concerned about the firm's future talent pool, since many young CPAs get recruited away from Montana.

LEARN FROM THOSE WHO'VE BEEN THERE

CPAs who have made the decision to become a partner — or who have chosen other paths (see the sidebar, "Career Pivots," at the end of this article) — offer the following advice to those at or approaching this juncture in their professional lives:

Know the steps to partnership

Many accounting firms don't outline clearly the path to ownership. So, ask about the path to becoming partner long before you near that title. "You really need to dig into what it means to be a partner," said Luke Selvig, CPA, who left his job as a manager in a firm to work in his family's business. "It's more than just having the title of partner, but what's in the partnership agreement? And what are the different levels of partners?"

In particular, ask how much time needs to elapse between a principal/nonequity and partner role and if there is some metric you need to reach before being offered an equity partner position. "You may not get all the answers you are looking for, but you need to keep bringing it up and need to be persistent," Wittich said. In addition, ask about the "unwritten rules" of being a partner, such as expected work hours or other potential commitments. Also, know what the firm's partners want you to do over the next three to five years if you become a shareholder, advised F. Carter Heim, CPA/CFF, CGMA, co-founder and former CEO at HeimLantz in Maryland, "How does it differ from what you've been doing as a senior manager?" he said.

Be clear on the buy-in cost and compensation

Before accepting a partnership offer, inquire about the cost to become an owner and how compensation is calculated. Ask, "How much have partners averaged in the recent past? What does this actually look like for me? When do bonuses get paid, and how are they calculated?" Wittich advised. "Most firms have some sort of formula."

Review your finances, assess the liabilities, and determine your personal needs and financial status: Are you single or married with children you need to support? Are you the highest or sole earner in your household? Do you have outstanding debt? Can you afford a hefty buy-in and still sustain your quality of life?

Recognize the liabilities

Know what liabilities you are taking on if you become an equity partner. "Have your own attorney look at it and have them explain what risks they see," said Mike Maksymiw Jr., CPA, CGMA, executive director, Firm Foundation, at Aprio LLP in Atlanta. It's imperative to understand the partner agreement thoroughly before you sign it, he advised.

Present your ideas as a manager

Once you become partner, you will want your ideas and opinions to be heard by other leaders of the firm. "Present ideas before you are partner," and see how they are received, said Sarah Flischel, CPA, a director, or nonequity partner, at Kundinger, Corder & Montoya PC in Denver, who is pondering whether to pursue equity partnership in 2024. If leaders aren't receptive, it could be a sign that it may be hard for you to make changes as a partner. Ask to be included in the firm's strategic planning sessions, particularly if you are already a nonequity partner or director. "That's a great place to share ideas for the future and see how the partners will respond," she added.

Conduct due diligence

Once you are offered an equity partnership, it's imperative you know everything about the firm, evaluating its books and decision-making processes, its assets and liabilities, Maksymiw said. He likened the partnership decision to buying a business. "Would you sign a deal to buy a business before you knew of its finances?" he said.

Also, Heim said, "Understand the financial stability of the firm. How is it positioned for the future? Are [leaders] making the decision based on the firm or based on individuals? Ask a lot of questions."

Assess relationships and the firm

Ask yourself questions about the organization and its people, McKoy suggested: "Is this firm somewhere you want to call 'home' for the rest of your career? Do [colleagues'] values embody the values that you have? Does your view on the world and the profession align with their views?"

Determine if you want to be in business with the partners, your peers, or even those below you in rank. A partnership "is a long-term marriage arrangement," Maksymiw said. "If you're not aligned with those people on the direction of the firm, being a partner could be very difficult."

Evaluate morale and retention

Observe the general morale at the firm and whether your firm is retaining employees or losing them. If retention is an issue, that could negatively affect you as an owner.

Seek advice

Consult other CPAs — both mentors and partners — who can help you navigate this process. "Talk with people who have been partners in the firm and ask about their experiences," Brewer said.

Career pivots

Some CPAs decide midcareer to pursue paths other than partnership. Sometimes, this means leaving their firms for new opportunities. Here are examples of CPAs who made such career pivots:

Mike Maksymiw Jr., CPA, CGMA, left his nonequity partner position with a large public accounting firm in June 2021 because he determined that partnership wasn't a fit for what he wanted to do. He called leaving his job "the hardest emotional roller coaster" but knew he wanted to pursue another role: helping public accounting firms strive for a better future. He is now the executive director, Firm Foundation, at Aprio LLP in Atlanta, leading the organization's alliance of CPA firms and helping like-minded accounting firms improve their operations. Maksymiw said a path to partner may exist for him at Aprio but that becoming a partner is not the end-all, be-all for him now; instead, he wants to be "fulfilled" in what he does.

Kelly Mann, CPA, left an Omaha, Neb.-based firm in late 2018 because culturally it wasn't a fit for her. Mann had other reasons for moving on: She had small children, desired more flexible and fewer working hours, wanted to focus on auditing employee benefit plans, and sought more of an opportunity to innovate. Still based in Omaha, Mann is now the owner of Kelly Mann CPA LLC and AuditMiner, a software company and tool that helps accounting firms streamline and standardize their 401(k) audits.

Mann did contract work for the first six months until her business became stable. "It was scary," she said of the transition. "But another audit came in at the end of the year, and that gave us enough income to pay bills." She now manages several employees in each entity, and both are flourishing.

"I wouldn't change my life now for anything," she said.

In June 2021 Luke Selvig, CPA, who was on the partner track at Boyum Barenscheer, chose to leave to work at his family's grocery store in central Minnesota, spending more quality time with his father and learning the business. The decision to leave a job he loved — and give up his long-term goal of becoming a partner — was gut-wrenching, but Selvig felt it was the right choice for various reasons.

"There was no pressure from family at all," Selvig said. "But one of the major deciding factors was being able to work with my dad and spend a lot more time with him." Selvig also said he was facing burnout and missed spending time with colleagues during the pandemic. Leaving, he added, "was a very long, drawn-out, thoughtful process," particularly since he enjoyed working at his CPA firm.

Today, Selvig is glad to be working in the family business. "You just realize life can be short," he said.


About the author

Cheryl Meyer is a freelance writer based in Minnesota. To comment on this article or to suggest an idea for another article, contact Courtney Vien at Courtney.Vien@aicpa-cima.com.


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AICPA RESOURCES

Articles

"How the Path to Partner Has Widened for Women, Minorities," JofA, May 26, 2022

"Increase Your Influence at Work," CPA Insider, Sept. 7, 2021

"Financial Considerations to Make Before Becoming Partner," AICPA.org, 2021

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