What are Guaranteed Payments?
Guaranteed payments are a type of compensation structure sometimes used in partnerships, particularly with professional services firms. In this model, a partner receives a fixed, regular payment from the partnership, regardless of the company's profitability in a given period. This is different from a typical profit-sharing arrangement where a partner's income depends on the business's performance. Guaranteed payments provide a stable and predictable income for the partner, similar to a salary, even though they are still a business owner and not an employee.