Do equity partners count toward the 50+ full-time employee baseline?

The short answer: list partners on their own line

Do not fold equity partners into the employee count, and do not leave them off the intake either. In most partnerships, and in LLCs taxed as partnerships, equity partners and members are owners who share profits, typically reported on a Schedule K-1, rather than staff paid wages on a W-2. Because the baseline is 50+ full-time employees at peak (contractors excluded), a firm near the line should report its full-time staff and its working partners as two numbers and let SourceX qualify it.

Illustrative: a regional engineering firm has 44 full-time employees and 8 equity principals who work in the business full-time. The intake should say 44 plus 8, not 52 and not 44.

Why owners sit outside a normal employee count

A headcount test measures the people a company employs. Partners and members own the business, so firms and their advisers normally track them apart from payroll. How each person is paid is the quickest way to sort them.

Firm structures differ, so treat the middle column as a starting point and confirm each category with the firm's own tax adviser. Similar edge cases come up with PEO co-employed staff, a staffing firm's W-2 associates and carriers that rely on owner-operators.

What does at peak mean for a professional firm?

The baseline looks at the highest full-time headcount the firm has reached, not today's number. For an accounting firm that may fall in busy season; for an engineering or consulting practice it may be the year before a large program ended or a group of partners left to start their own firm. Take the count from payroll records for that period and note the year.

The rights question partners raise first

In professional firms the harder question is usually what the firm can license, not how many people it employs.

• Client files are not the firm's to license. Engagement files, client documents and confidential client information belong to or are protected for clients, and licensing them without consent is a red flag. Law firms face particular limits, set out in licensing a law firm's document archive.
• The firm's own operating records are the asset. Methodologies, templates, internal training, quality reviews, proposal and pricing decisions, staffing decisions and internal email can qualify, with client details redacted under rules agreed before any work begins.
• Partner-written material needs a check. Documents employees create in their jobs are generally owned by the employer as works made for hire, while content from contractors may not be unless rights are assigned in writing (US Copyright Office, Circular 30). Partners are owners rather than employees, so whether the firm owns what they wrote usually turns on the partnership or operating agreement. Ask the firm's counsel.

A five-minute intake for a firm near the line

1. Pull the peak full-time employee count from payroll, by year.
2. List working equity partners or members on a separate line with typical weekly hours.
3. List contractors, of counsel and retired partners separately; they are excluded.
4. Note how many years of practice management, document management and email history the firm still holds.
5. Identify who can sponsor the review, such as a managing partner, CEO, CFO or other authorized representative, and whether the partnership agreement calls for a partner vote.
6. Run a preliminary screen with the company fit checker and compare the firm with the baseline on who qualifies.

If you are the CPA making the introduction

Check your own professional rules before you register. Under the AICPA's commissions and referral fees rule (ET 1.520), a member in public practice may not accept a commission for recommending a product or service to a client when the member or firm also performs an audit, review, certain compilations or an examination of prospective financial information for that client, and permitted commissions and referral fees must be disclosed to the client (AICPA Code of Professional Conduct). State boards can be stricter, so confirm with yours. The partner page for accountants covers how firms approach this.

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company. The reward is payable only after the buyer pays and SourceX receives its fee, it is never deducted from what the client receives, and no reward is guaranteed.

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Next step

Send SourceX two clean numbers rather than one rounded one. Once your own rules allow it, register as a partner and introduce the firm, or ask its managing partner to apply directly using your referral link.