K1 for Profit Unit Shares but no distribution of profits?

[Pinevalleyite]

I recd PIU’s as part of my job at an LLC. My award agreement references the owner/partner LLC but at the time I was told they couldn’t provide that as it’s a private company and that agreement had proprietary info owners and partners didn’t want shared. Company found that even though no profits are distributed to me as a lower class holder, they need to start issuing a K1 retro so I would pay taxes on the portion of the profits that could ultimately come to fruition as my shares when the business is sold. In light of this, (and with newer management running the show), I was now provided with that agreement. My agreement reads that any vested PIU’s I would keep if my employment terminates for any reason so I guess it would make sense I’d pay taxes now on what will ultimately be my gain when company sells. The larger agreement seems to caveat that by stating if you resign, you forfeit vested shares. How is that possible and what would happen to the taxes I’d pay along the way if I’m not there for the actual sale.

[Mike9241]

we can't see the agreements and for your own benefit you should have the agreement reviewed by a lawyer.

generally, the appreciation in PUI is not taxed until sold. however, the agreement may provide for you to receive actual compensation in the form of guaranteed payments which would be subject to self-employment tax. if you didn't actually get paid the GPs your basis would increase affecting 

here is one blog outlining how they work. Search the web for other threads on them. however, as stated above, there are variations so talking to a lawyer/tax pro is in your best interest.

 https://humancapital.aon.com/insights/articles/2022/profits-interests-how-do-they-work#:~:text=If%20...