Limited Liability Partnership


Re-capturing deferred compensation for limited partners (LLC / LLPĀ partners)

Limited Partners may be subject to self-employment tax

The 23rd June, 2014, IRS ruling on IRC 457A is here:

The effect of that ruling is to demolish common deferred compensation structures for working members of a limited partnership (LLC/LLP).

September 2014 decision on Section 1402(a)(13) eliminates the 409a option

Both 457A and the anti avoidance rule 409A mean no deferred compensation for working members of a limited partnership.

Section 83 rules on vesting and forfeiture and conversely, settled interests, are a key test of deferral.

– See more at:

The IRS Issues Chief Counsel Advice on Self-Employment Tax September 5th 2014 (ILM 201436049)

The ruling could potentially affect limited partners (including LLC / LLP partners) in every industry.

While this tax issue has been fought on several levels over the past 20 or more years, it had gone dormant since 1997. Now, the IRS Chief Counsel Advice (ILM 201436049 (05/20/2014), released on September 5, 2014, concludes that all members of the limited liability company are subject to self-employment tax on their distributive shares of income of the LLC.

read more here:

The effect of these ruling is to demolish common U.S. situs deferred compensation structures for members of a limited partnership


All comes down to this simple statement ” it is a trade-pay tax now, have the money now. Pay tax later have the money later” which is our IRC 402(b) Foreign Retirement Plan legal framework solution.


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