In doing some research for my forthcoming book and agency and partnership law, I ran across a statistic that I found both interesting and, at least initially, rather puzzling. According to the IRS, in 2001 there were 64,985 partnerships in the professional and business services industry classification (with a total of 183,475 partners). Those partnerships had net total income of over $18 billion. In contrast, there were 99,006 LLCs in that industry group (with 373,336 members), but the much larger number of LLCs pulled in less than $8 billion in total income. Why are per firm and per member income so much lower in LLCs than partnerships?
Upon reflection, I suspect the answer is that many large and potentially high revenue professional services firms (such as law firms) are opting between the old fashioned general partnership and the newer limited liability partnership, rather becoming LLCs. Indeed, in some states (I believe California is still one), professional services firms like law and accounting cannot organize as LLCs. There's a very good discussion of the choices law firms are making Baker & Krawiec, The Economics of Limited Liability: An Empirical Study of New York Law Firms.
