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From LP to Inc. Why are some companies changing their structure?

Here's a hint: changes to tax law.

Steve Schwarzman, CEO and co-founder of the Blackstone Group, participates in a Business Roundtable discussion on 'Transitioning Innovations from Labor-to Market', during a CEO Innovation Summit, on December 6, 2018 in Washington, D.C.
Steve Schwarzman, CEO and co-founder of the Blackstone Group, participates in a Business Roundtable discussion on 'Transitioning Innovations from Labor-to Market', during a CEO Innovation Summit, on December 6, 2018 in Washington, D.C.
Mark Wilson/Getty Images

The world’s largest private equity firm – The Blackstone Group – will change its legal structure from a partnership to a corporation. The upside: As a corporation, Blackstone’s shares will be more liquid and can be included in indices and exchange-traded funds, which could increase demand. The downside? Blackstone will pay the corporate taxes on profits, rather than passing them along to shareholders and letting them pay the taxes. The switch is proving popular since the Tax Cuts and Jobs Act cut the top corporate tax rate from 35% to 21%. Blackstone’s move follows changes of structure by the smaller private equity firm Ares Management shortly after the tax cut took effect, and by similarly-sized KKR, one year ago.

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