Profits Interest

Dictionary Says

Definition of 'Profits Interest'


A monetary right awarded to the general partner, investment manager or a service provider of a partnership. The award consists of receiving a percentage of profits from a partnership without having to contribute capital to the partnership. Profits interests are often criticized as recipients can generate large profits for themselves while not incurring sufficient risk.
Investopedia Says

Investopedia explains 'Profits Interest'


This method serves as an incentive for partners to become more proactive in pursuing bigger and better profits thus contributing towards the companies' growth. This situation presents a tax benefit in that beneficiaries of this instrument can be taxed under long-term capital gains versus the higher federal tax rate.
comments powered by Disqus
Hot Definitions
  1. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  2. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
Trading Center