Using partnership compensatory devices in succession planning
Unique aspects of closely held partnership exit strategies
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Partnerships and limited liability companies (LLCs) taxed as partnerships have considerations that are somewhat unique from corporations in the compensation and benefits area. Therefore, partnership succession planning using compensatory devices looks a little different from corporate succession planning. Similar goals can be reached, but the methods used to meet those goals will include partnership options, such as classes of partnership interests, rather than stock-based options.
Depending on the type of business operated by the partnership and the specific facts relating to current and future potential partners, the options will need to be analyzed to achieve the best fit for a given business. This article explores the options available and the factors that should be considered when choosing a partnership compensation structure that will facilitate succession planning.