Equity Compensation Grants in Partnerships and LLCs: Overcoming Tax Challenges and Key Planning Techniques

Carried Interest, Section 83, Profits vs. Capital Interests, Options and Phantom Equity, and More

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

Conducted on Wednesday, January 27, 2021

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers with a detailed analysis of the tax implications of equity compensation grants in partnerships and LLCs. The panel will discuss profit versus capital interests, phantom equity, the application of Section 83, carried interest, the impact of tax reform, and best tax planning methods for compensatory interests and other arrangements.

Description

There are several issues faced by partnerships and LLCs when handling equity compensation matters. These issues are unique to partnership and LLC equity compensation due to the differences in the tax regime applied to entities taxed as partnerships compared to those taxed as corporations. Tax counsel and advisers must have thorough knowledge of the forms that equity compensation can take and applicable tax rules to avoid any unintended tax consequences.

Partnership and LLC equity compensation can take several forms, including granting profits interests, capital interests, and options to acquire such interests. Each of these arrangements has specific economic and tax implications, including whether to treat the grantee as an employee or a partner for tax purposes.

Also, tax counsel and advisers face additional challenges, including the application of Section 83, significant changes to carried interest taxation under tax reform, the treatment of fee waivers, and lack of definitive IRS guidance. These and other issues present planning and compliance challenges to consider carefully.

Listen as our experienced panel offers a thorough and practical guide to planning considerations in partnership and LLC grants of equity compensation, phantom equity, the application of Section 83, and the impact of new carried interest rules.

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Outline

  1. Types of equity compensation and alternatives for partnerships and LLCs
  2. Planning considerations after tax reform
  3. The impact of new rules on carried interest
  4. Reporting and compliance challenges for partners/members
  5. Best practices in structuring equity compensation arrangements to avoid unfavorable tax treatment

Benefits

The panel will review these and other key issues:

  • Capital interest versus profits interest as equity compensation in partnerships and LLCs
  • Different planning methods based on the type of equity compensation
  • Application of Section 83 and unvested interests
  • Section 409A and compensatory grants of equity interests in partnerships and LLCs
  • Tax treatment of carried interest and fee waivers arising from compensatory grants of equity interests
  • Best practices and critical considerations for equity compensation grants in partnerships and LLCs following tax reform

Faculty

Mendelowitz, Adam
Adam S. Mendelowitz
Partner
Finn Dixon & Herling

Mr. Mendelowitz practices in the areas of executive compensation, employee benefits and ERISA. He has been part of...  |  Read More

Spiro, Michael
Michael P. Spiro
Partner
Finn Dixon & Herling

Mr. Spiro chairs the firm's Tax group, where his practice focuses on providing federal and state tax...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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