Our last post described the portions of an executive employment agreement that may be impacted by Section 409A. However, Section 409A may also impact the structure of other, less traditional compensation paid to key employees. In the context of a closely-held business, two commonly-encountered alternative compensation arrangements used outside of the context of an individual
Section 409A, Part II: The Employment Agreement Obstacle Course
Closely-held businesses often rely heavily on a small group of key employees to help their businesses succeed. Given the value of these key employees to the business, it is not uncommon for the business to offer them certain types of additional executive compensation, in addition to standard base salary and participation in typical employee welfare
Section 409A, Part I: What Is It?
Ask most closely-held business owners what words come to mind when they hear the names “Enron” and “Worldcom” and many would say things like “bankruptcy,” “failure,” “scandal” and “greed.” Ask those same business owners what impact those two names had on the ways they are able compensate their key employees and most would likely say
Family Transfers, Part V: Compensation
“Call it what you want, incentives are what get people to work harder.” — Nikita Kruschev
Most of our clients are closely held, often family-owned businesses. The current owners may be the founders of the business, or they may be a generation or two removed. Sometimes, the owners have children who are active in
Equity Compensation in a Partnership
The grant of an equity interest by a partnership to one of its key employees should be approached with great caution because it may result in unintended tax consequences, both for the partnership and the partner.1
Many corporate employers use equity-based compensation in the form of stock or stock options to motivate their employees.
The 2013 Rate Increases and Deferred Compensation
For many executives, the 2013 tax year began with an increase in the marginal federal income tax rate applicable to their compensation, from 35% to 39.6%. It also saw the expiration of the temporary payroll reduction for the employee’s share of OASDI, which consequently increased from 4.2% to 6.2%, plus an additional 0.9% increase