At twenty employees with several partners, a flat model works. Typically however, that approach only scales so far. As an organization starts hitting 30-40 people it starts to become hard to maintain informality and avoid territoriality. At 150 or so, you hit Dunbar's number.
http://en.wikipedia.org/wiki/Dunbars_number
Don't get me wrong, it sounds like a great place to work and an admirable way of managing people.