Structuring Equity Compensation for Partnerships and LLCs: Considerations After Tax Reform

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

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Conducted on Tuesday, February 5, 2019

Recorded event now available

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This CLE/CPE course will provide employee benefits counsel with an overview of the types of equity compensation arrangements available to partnerships and LLCs. The panel will review the impact of the new tax reform, discuss tax consequences, advantages and disadvantages, design and structuring, and implementation considerations.


Partnerships and LLCs have several alternatives for providing equity compensation to their employees, including granting restricted equity, profits interests, and phantom (or “synthetic”) equity.

Partnership and LLC equity compensation arrangements present executive compensation counsel with intricate design and structuring challenges, unlike corporate equity compensation, which is relatively straightforward. Our authoritative panel will discuss these challenges by providing a brief overview of the structuring and tax aspects of common corporate equity compensation plans that advisors and their clients may be familiar with, and then discussing in more detail the structuring and tax aspects of comparable equity compensation plans for partnerships and LLCs.

Listen as our panel offers solutions and strategic approaches for structuring equity compensation for partnerships and LLCs and for avoiding common pitfalls. Our panel will also address the effect of recent tax reform on structuring equity compensation plans for partnerships and LLCs.



  1. Overview of Basic Equity Compensation Alternatives
  2. Full Equity Interests (Capital and Profits)
    1. Review of Corporate Restricted Stock, Restricted Stock Units, and Phantom Stock
    2. Partnership / LLC Restricted Equity
    3. Partnership / LLC Restricted Equity Units
    4. Partnership / LLC Phantom Equity
  3. Partial Equity Interests (Profits Only)
    1. Review of Corporate Stock Options and Stock Appreciation Rights
    2. Partnership / LLC Equity Options
    3. Partnership / LLC Equity Appreciation Rights
    4. Partnership / LLC Profits Interests
  4. Hybrid Interests
    1. Profits Interest with “Catch Up” Allocations
    2. Gain Sharing Interests
  5. Holding Company Arrangements
  6. Conclusion


The panel will review these and other key issues:

  • How does a capital interest differ from a profit interest?
  • Should a Section 83(b) election be made for unvested interests?
  • What are the requirements for valuing capital interests and setting the distribution threshold for profits interests, particularly in the case of serial issuances?
  • What are the capital account maintenance considerations for alternative forms of partnership / LLC equity grants equity grants?
  • What are the differing federal and state income tax compliance aspects of alternative forms of partnership / LLC equity grants?
  • Does Section 409A apply to a partnership / LLC equity grant?
  • Can a partner or LLC member receiving an equity interest also be an employee of the entity?
  • What are the alternatives for handling equity compensation grants when a partnership / LLC is acquired or converts to a C corporation?


Browne, James
James R. Browne

Barnes & Thornburg

Mr. Browne advises clients on the U.S. income tax aspects of domestic and international business transactions and...  |  Read More

Shannon, Lori
Lori L. Shannon

Barnes & Thornburg

Ms. Shannon counsels private and public companies and tax-exempt entities on the design and implementation of...  |  Read More

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