The debate over self-employment taxes on management fees just got more complicated.

In the latest installment of our “Carried Away” miniseries, a multiepisode series under our PE Pathways podcast exploring the economics of private funds, Troutman Pepper Locke Partners Thao Le, Stephanie Pindyck Costantino, Saba Ashraf, and Tom Gray break down the evolving legal landscape surrounding the taxation of management fee income and what it means for how private equity firms structure their management companies today.

The Fifth Circuit’s decision in Sirius Solutions handed a victory to fund managers, holding that state-law limited partners may be able to avoid self-employment taxes on management fee income — even when actively involved in managing investments. But with the First and Second Circuits weighing related cases involving Denham Capital and Soroban Capital Partners, a circuit split may be on the horizon, and the possibility of Supreme Court review may follow.

In this episode, our team covers:

• Management company structures
• The self-employment tax framework
• The Sirius Solutions decision 
• Pending decisions in the First and Second Circuits
• Practical planning strategies

Whether you are launching a new fund or revisiting an existing management company structure, this episode is essential listening for GPs, CFOs, and fund counsel navigating one of private equity’s most unsettled tax questions.

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