Structuring Equity Compensation for Partnerships and LLCs; the New Tax Reform Law Considerations

Several alternatives are available to partnerships and LLCs for providing equity compensation to their employees, including granting profits interests, capital interests, and options to acquire such interests.

Partnership and LLC equity compensation arrangements present executive compensation counsel with complex design and structuring challenges, unlike corporate equity compensation, which is relatively straightforward.

IRS guidance is lacking on a number of important issues, including whether a partner/member can be an employee for tax purposes, how Section 409A applies, and when 83(b) elections should be made.

Listen as our authoritative panel offers solutions and strategic approaches for structuring equity compensation for partnerships and LLCs and for avoiding common pitfalls that can lead to disastrous tax consequences. The panel will review the impact of the new tax reform law passed in late 2017.

1. Equity compensation alternatives available to partnerships and LLCs
   1. Profits interests
   2. Capital interests
   3. Options to acquire capital or profits interests
   4. Phantom arrangements
   5. Income tax consequences/advantages/disadvantages
2. Design, structuring and implementation considerations
   1. Section 83(b) elections
   2. Capital account book-ups and valuation
   3. Section 409A considerations
   4. Impact of fee waiver proposed regulations
   5. Impact of partner/member status on being employee
   6. Impact of partner/member status on employee benefits
   7. Conversion to C corporation

The panel will review these and other key issues:

• How will the new tax reform law impact executive compensation structures?
• How does a capital interest differ from a profit interest and what tax ramifications result from the type of equity interest granted?
• Should a Section 83(b) election be made for unvested interests?
• Can a partner or LLC member receiving an equity interest also be an employee of the entity?

Learning Objectives

After completing this course, you will be able to:

• Distinguish the economic and tax differences between capital interests and profits interests
• Recognize the tax consequences associated with different types of partnership and LLC equity interests
• Determine how Section 409A applies to partnership and LLC equity interests and when and whether a Section 83(b) election should be filed
• Ascertain tools to evaluate the impact of granting a partnership or LLC interest to an employee and possible structuring alternatives relating to dual status issues

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business, legal or public firm experience at mid-level within the organization, providing tax planning and preparing complex tax forms and schedules for partnerships and LLCs; supervisory authority over other preparers/accountants. Knowledge and understanding of partnership and LLC structure, equity compensation in these entities, Section 409A, and 83(b) elections; familiarity with equity compensation alternatives, capital interest, profit interest and equity interest for pass-through entity employees, members and partners.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.