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Structuring Waterfall Provisions in LLC and Partnership Agreements

Navigating Complex Distribution Structures, Minimizing Negative Tax Consequences

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

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Conducted on Thursday, August 31, 2023

Recorded event now available

or call 1-800-926-7926

This CLE/CPE course will guide corporate and tax counsel on the various methods of structuring waterfall distribution provisions in LLC and partnership agreements. The panel will examine a variety of economic and tax considerations such as timing and types of distributions (including tax distributions), approaches to drafting priority returns (internal rate of return vs. preferred return), carried interest/promote calculations, capital shifts, relationships between distribution and allocation provisions, and the interaction of IRS partnership audit rules and distribution waterfalls.


In LLC and partnership agreements, waterfall provisions are heavily negotiated clauses that describe the priority of cash and assets to distribute among the entity's members and partners.

The distribution waterfall provisions are critical to ensuring that distributions conform with the substance of the deal among the partners. Structuring waterfall provisions requires an understanding of payment priorities, economic terms, tax implications, and the impact of the IRS partnership audit rules.

Counsel drafting and negotiating waterfall distribution provisions must ensure that the clauses are consistent with the economic arrangement of the parties. But, they must also ensure that the waterfall provisions are consistent with the partnership tax allocation agreement to avoid adverse tax consequences for the entity and its members or partners.

Listen as our authoritative panel discusses considerations and best practices for structuring waterfall provisions in LLC and partnership agreements, including the economic and tax impact of the clauses.



  1. Waterfall provisions, generally
  2. Determining/drafting waterfall provisions
  3. Understanding the economic arrangement of parties
  4. Tailoring accounting and tax provisions
  5. Implications of IRS partnership audit rules


The panel will review these and other key issues:

  • What are the different types of waterfall provisions, and when should each be used?
  • What are the key considerations and best practices for counsel drafting and negotiating waterfall provisions in LLC or partnership agreements?
  • What are pitfalls to avoid when tailoring partnership allocation provisions to waterfall provisions?
  • What are the implications of IRS partnership audit rules for tiered waterfall distributions?


Greathouse, Jared
Jared Greathouse

Amini & Conant

Mr. Greathouse focuses on corporate law, civil litigation, estate planning, and probate. He assists businesses, both...  |  Read More

Newburn, Ryan
Ryan M. Newburn

Newburn Law

As a Big Law trained corporate lawyer, Mr. Newburn as a long track record of transforming ideas and concepts into legal...  |  Read More

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