Profits Interests; Section 83(b) Election Sample Clauses
The "Profits Interests; Section 83(b) Election" clause defines how profits interests in a partnership or LLC are granted to recipients, and addresses the recipient's right to make a Section 83(b) election for tax purposes. In practice, this clause outlines the process by which an individual can receive a share of future profits and appreciation in the company, and specifies the timing and requirements for filing the 83(b) election with the IRS, which allows the recipient to be taxed on the value of the interest at the time of grant rather than when it vests. The core function of this clause is to clarify the tax treatment of profits interests and to ensure that recipients understand their rights and obligations regarding the 83(b) election, thereby preventing unexpected tax consequences and disputes.
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Profits Interests; Section 83(b) Election. (a) Each of the Management Units is intended to constitute a “profits interest” within the meaning of Internal Revenue Service Revenue Procedure 93-27 and 2001-43. A profits interest is granted in connection with the performance of services and is a right to receive distributions funded solely by the profits of the Company which are generated after the grant. As such, the Managing Member shall, if necessary, limit distributions and allocations of profits to Grantee so that such distributions and allocations do not exceed the available profits in respect of Grantee’s related profits interest. Consequently, under certain circumstances, distributions and allocations with respect to a Management Unit may differ in amount from distributions and allocations with respect to other Units issued or Transferred at a different time.
(b) Notwithstanding any provision of this Agreement or the Company LLC Agreement to the contrary, Grantee shall, as a condition subsequent to the issuance of the Management Units pursuant to this Agreement, execute and deliver a valid and timely election under Section 83(b) of the Code, in substantially the forms attached hereto as Annex A, to both the Internal Revenue Service and the Company within thirty (30) days of the Date of Grant. Upon the failure of Grantee to make such valid and timely election, the issuance of the Management Units shall be void ab initio.