Drafting Partnership Agreements: Ensuring You Get The Returns You Bargained For

PIP (partners' interests in the partnership) allocations are very commonly used in partnership agreements.¹ For this reason, Investors and managers should understand the basics of PIP allocations and whether and when they should be used before entering into a partnership agreement.

In this Alert, we cover the following topics:

• What are PIP allocations?
• How do PIP allocations work?
• Choices in applying PIP allocations
• When they are useful?
• When they are less useful?
• When they are at odds with other allocations?
• Whether PIP allocations obviate the need for special allocations like nonrecourse deductions, minimum gain, qualified income offset, and curative allocations