One of the most pronounced trends among the nation's top law firms in the past 10 years is that most firms — the overwhelming majority of firms — are two-tiered partnerships. A decade ago, 80 percent of the 100 largest law firms in the United States were single tier equity partnerships. Now 80 percent are two-tiered partnerships (see, e.g., '''De-equity' Stirring Big-Firm Partner Ranks'' by Dick Dahl for Lawyers USA, August 27, 2007). Although the importance of retaining a single-tiered partnership may seem diminished given the groundswell in favor of promoting non-equity partners, there are still important considerations in choosing between a one- or two-tiered partnership.
The first major distinction to be made is how the way the partnership is structured affects the bottom line. The conventional wisdom is that a two-tiered partnership allows the rainmaking equity partners to keep more of the ''pie'' to themselves. In other words, non-equity partners exist so that the profits of the firm can be split among a smaller pool of partners — typically those who are the ''major players'' in the firm. Presumably, a partner is more likely to promote only those lawyers who are contributing to the profitability of the firm, and the non-equity category exists so that there is no need to share profits with valuable, but less profitable, partners.
The evidence doesn't support the proposition that equity partners make more money in a two-tiered partnership. It appears that the firms that choose to have single-tier partnerships (though they find themselves in the ever-shrinking minority of firms) are the most profitable. In his blog, Adam Smith, Esq., Bruce MacEwen makes the convincing case that the most recent AmLaw statistics prove that profits per partner are inversely proportional to the percentage of non-equity partners a firm allows. In other words, firms with single-tier partnerships (i.e., no non-equity partners) generally have the highest average revenue per lawyer.