The issuance of a partnership profits interest is a tax-efficient tool for a partnership (including an LLC or other entity treated as a partnership for tax purposes) to incentivize its employees or other service providers. If structured properly, the grant of a profits interest should not constitute a taxable event for the recipient. In addition, the recipient of a partnership profits interest may be eligible to benefit from the reduced tax rate for long-term capital gains upon a sale or change of control of the partnership.
GT's Quick Guide to Partnership Profits Interests summarizes the key requirements to qualify as a partnership profits interest, the benefits of qualifying, and certain other tax consequences to the issuing partnership and the recipient.
Click here to view the Quick Guide.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
