Being paid as a Partner is much more unpredictable and risky than being paid as a W-2 employee. This is one reason why most professional services partnerships feel justified paying their W-2 employees a relatively small amount of what they bill clients for their work.
Being paid as a Partner means that your annual income is based on how well the business does and how much of the business you own, not on what you actually did or contributed.
- Because you never really know what you will make in a year until the year is over, Partners typically want fairly sophisticated monthly reporting and forecasting.
- Because how much you earn is hugely dependent on how much of the business you own, conventional Partnerships typical spend a lot of time and effort deciding who should own how much.
- Because Partner income is not tied directly to how much or how well a Partner works, conventional Partnerships typically invest in developing rigorous review systems.