Private Equity–Sponsored LLCs: Negotiating Tax Distributions for Preferred Equity Investments

Abstract

This article explores certain economic implications of the manner in which a limited liability company with preferred interests calculates the amounts distributed to its members to pay taxes. The article uses numeric examples to demonstrate the way in which tax distributions may distort the economic arrangements of the parties to a transaction.

TOPICS: Private equity, legal/regulatory/public policy, portfolio management/multi-asset allocation