Equity Incentives for LLCs: Profits Interest « MeetKendall.com. UPDATE 12/6/09 I am posting the Excel spreadsheet used in calculations below, as well as a generic profits interest grant document.
I do not have a generic LLC Operating Agreement that I can send to you but if someone out there has or creates one, I would appreciate use of it with my audience. Please review any ideas here with your attorney…I am not an attorney, just a business junkie who strongly believes in rewarding employees through equity. For years I have preferred Corporations to Limited Liability Companies for three main reasons: If outside funding is required, most private investors prefer corporations.If the organization is profitable, there is a tax advantage to Subchapter S corporations over LLCs.If owners want to incentivize employees with equity, stock options are commonly understood and easy to roll out.
Call me a “flip-flopper” because I may be changing my mind about LLCs vs. Equity Incentives in Limited Liability Companies (LLCs) (aka a Limited Liability Corporation or LLC) Home » Articles » Limited liability companies (LLCs) are a relatively recent form of business organization, but one that has become increasingly popular.
LLCs are similar in many ways to S corporations, but ownership is evidenced by membership interests rather than stock. As a result, LLCs cannot have employee stock ownership plans (ESOPs), give out stock options, or provide restricted stock, or otherwise give employees actual shares or rights to shares. Accounting for Incentive Units In an Limited Liability Corporation. Accounting for Incentive Units in a Limited Liability Corporation Home page Issue When a company is incorporated as a Limited Liability Corporation ("LLC"), the company gives some employees incentive units which vest when certain conditions are met (e.g. employment period exceeds three years).
The employee has the right to purchase these units which are voting equity units at a strike price which is stated in advance.