Partnership and LLC Equity Compensation

Summary

This practice note addresses fundamental considerations in structuring equity compensation for general and limited partnerships, as well as limited liability companies (LLCs) that are classified as partnerships for federal income tax purposes. It summarizes alternative approaches commonly used by entities taxed as partnerships to provide key service providers the opportunity to become equity owners and the advantages and disadvantages associated with each approach. For simplicity, although this practice note generally uses the term partnership, the information is equally applicable to all entities classified as a partnership for federal income tax purposes, including general partnerships, limited partnerships, and LLCs.