The Dangers of Treating Partners as Employees

In recent years many companies have found it very difficult to retain key employees.  In order to mitigate this issue, many companies that are organized as partnerships are offering their essential employees an equity interest in the partnership, commonly called “profits only interests”.  There are many risks, however, that companies organized as partnerships need to take into consideration before offering equity to their employees.  They may be unaware that even a small equity interest can cause unwanted tax consequences such as over/underpaid FICA taxes, and can also change the treatment of compensation and company paid benefits.   These are just a few of the risks that need to be assessed.  If you’d like to know more please click here.