Individual owner compensation in a hybrid limited liability entity in a comparative context: LLC (the USA), LLP (the UK) and the small partnership (Lithuania)

ENThe article examines regulatory approaches to individual owner compensation that does not take the form of proft sharing in a hybrid limited liability entity in the three jurisdictions in a limited liability company (LLC) in the USA, a limited liability partnership (LLP) in the UK (for the sake of accuracy only England will be referred to hereafter), and a small partnership with all members-individuals mandatorily in Lithuania. The comparative analysis reveals a divergence in the regulatory approaches to compensating a hybrid entity owner for the entrepreneurial eforts in small and medium-sized businesses. The most fexible regime includes the default no-compensation rule coupled with the possibility for an owner to act in a nonmember capacity and it applies to an LLC in the USA under ULLCA. The Lithuanian legislation imposes the most rigid approach and prohibits a member from compensating for an additional role (either as an employee or an independent contractor) in a small partnership (save for a member-manager in a manager-managed small partnership and a member representative in a member-managed small partnership). England follows an intermediate approach and allows members of an LLP to depart from the no-compensation rule; but England will likely restrict the dual status of a member employee in the entity.The article concludes that, although partnership principles heavily infuence the owners’ role in a hybrid entity, the general ban foreseen in the Lithuanian legislation needs to be modifed to allow similar freedom as a private limited liability company has to reward hybrid entity owners for their eforts in running business operations. Keywords: Small and medium-sized business; Hybrid limited liability entity; Partnership; Owner compensation; No-compensation rule; Dual status of owneremployee. [From the publication]

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