409A - Change in Control of Disregarded Entity

We have a client looking to purchase 100% of the equity interests of an LLC that is currently disregarded for tax purposes. In the course of diligence, we discovered that the LLC is party to two agreements under which it provides deferred compensation to each of two employees. The agreements were not drafted with 409A in mind and so are neither structured to be exempt from or clearly compliant with 409A. We are currently evaluating the extent to which we can argue that the agreements are operationally compliant with 409A. Based on the language of the agreements, we cannot take advantage of any 409A exemption.

The agreements include a change in control as a payment trigger. We understand that, even though the 409A change in control rules (payment trigger and permissible termination rules) are only explicitly written to apply to corporations, the IRS has indicated that these rules apply by analogy to entities taxed as partnerships. See, e.g., Notice 2005-1, Q/A 7; 70 Fed. Reg. 57,930, 57,948, Proposed Preamble VI(E). Is it permissible to apply these rules by analogy to a disregarded entity as well? That is, is it permissible to take the position that a 409A-compliant change in control is triggered when 100% of the equity interests of a disregarded entity are sold (to a non-related entity)? Or, to be compliant with 409A change in control rules, must the change in control be triggered with respect to an entity that is taxed as a corporation or partnership?

Any thoughts are appreciated - thanks!

If it's a disregarded entity that means it is owned 100% by someone else, which I assume is a corporation. There is no partnership, because there is only one owner. If there were more owners it would not be a disregarded entity.

Your corporation is selling the assets of the LLC, correct? (No rational buyer purchases equity interests and potential claims.) Just take the position that the employees have terminated employment due to the asset sale and pay them as terminated employees if the agreement provides for that. You could also treat them as employees affected by a change in control and terminate only with respect to them but I like the employment termination rationale better, and just vote to vest them if employment termination is not a vesting event. 

For the deficient language in the "deferred comp." agreement, I assume you will maintain responsibility under the sales agreement, but I don't know of the IRS auditing the fine print in agreements. It's usually just eager beaver attorneys and accountants in a transaction. 

Not legal advice, of course. Do your own due diligence, etc.