Partnership Profits Interests: What attorneys should know

Joshua S. Gelfand | Troutman Pepper Hamilton Sanders LLP

Josh focuses his practice on advising public and private companies, and private equity clients, in financial and strategic merger and acquisition transactions and executive compensation matters, as well as assisting asset management clients with the structuring, implementation, and administration of carried interest and “phantom” carried interest programs.

Josh advises clients on the compensation, benefits, and employment-related aspects of domestic and international merger, acquisition, and finance transactions for companies and private equity clients. He also assists clients with the design, implementation, and administration of equity and incentive compensation plans, including carried interest and “phantom” carried interest plans, the negotiation of executive employment, severance, and other compensation arrangements, and public disclosures relating to executive compensation.

Tom Gray | Troutman Pepper Hamilton Sanders LLP

Tom is a partner in the firm’s Tax practice. With a background in both accounting and law, Tom focuses his practice on the tax aspects of corporate and partnership transactions, including mergers and acquisitions, reorganizations, restructuring, spin-offs, and equity and debt financings. Additionally, Tom advises clients on the special tax considerations related to regulated investment companies and real estate investment trusts.

Tom’s experience also includes advising domestic and offshore clients on cross-border tax matters; representing hedge funds on fund structuring and the tax consequences of investments; advising private equity fund investors, including university endowments; negotiating, reviewing, and drafting the tax aspects of stock and asset purchase agreements, partnership agreements and credit agreements; and advising clients on the restructuring of financially troubled entities.

In addition, Tom is experienced in the special tax considerations affecting hedge funds, private equity funds, regulated investment companies, and real estate investment trusts.

Session I – Understanding and Structuring Partnership Profits Interests | 12:00pm – 1:00pm

• Understanding Profits Interests: What they are, how they differ from capital interests, and the requirements to qualify under the “safe harbor” under IRS Rev. Procs. 93-27 and 2001-43
• Granting and Structuring Profits Interests: Common Structures (including tiered partnerships), what types of entities may grant profits interests, benefits and tradeoffs of profits interests vs. other forms of incentive equity
• Documentation: Common terms in profits interest plans and grant agreements, including vesting, forfeiture, distribution rights, and repurchase rights
• Tax Treatment of Profits Interest: How tax treatment differs from other forms of incentive equity; Protective section 83(b) elections; How profits interest ownership can impact and affects employment status

Break | 1:00pm – 1:10pm

Session II – Compliance and Regulatory Issues, & Risks and Pitfalls | 1:10pm – 2:10pm

• Drafting of partnership agreements and incorporating profits interests
• Common mistakes that can occur with respect to issuance of profits interests
• Filings that are applicable to the issuance and receipt of profits interests