Negotiating Favorable Executive Equity Terms in an LLC — Capital vs. Profit Interests
Two weeks ago, on Sunday April 20, 2022, CEOWorld magazine published an article I wrote on “Negotiating Favorable Executive Equity Terms in an LLC — Capital vs. Profit Interests”
This new article is designed for CEOs, C-level and senior executives, who receive a job offer from a limited liability company where LLC equity will comprise an important component of your executive compensation package. Most senior executives are familiar with executive stock and stock options, including ISOs and non-qualified option grants offered by corporation employers. But how do you evaluate equity that is not stock or stock options? What issues should you be concerned about when your executive equity package is comprised of LLC “member units”, called profits interests or capital interests?
This article will cover issues important to the executive when your equity compensation is units in an LLC, including
- The difference in rights of the two kinds of LLC interests — profits interests and capital interests,
- The difference in taxation of profits and capital interests,
- The advantages that an LLC profits interest can offer over a corporation’s equity interest, whether stock or options, if significant equity appreciation is likely,
- The importance of determination of profit interest threshold amount,
- Important protections to assure your share of the value appreciation if the LLC succeeds,
- Other valuable protections to assure your right to a cash payout with others if the LLC succeeds.
My article concludes with discussion of key terms to watch for in the LLC operating agreement. My article stresses the importance of negotiating in your own equity grant, job offer or employment contract that those key fixed Operating Agreements terms will be applied in a manner to assure your reasonable protections and the benefit of your bargain in accepting the job offer with this LLC.
To see my full CEOWORLD magazine. article, go to LINK: https://ceoworld.biz/2022/04/20/negotiating-favorable-executive-equity-terms-in-an-llc-capital-vs-profit-interests/
This was my 37th article published in CEOWORLD since 2016. Previously, the editor advised that I can use “Featured in the CEOWORLD magazine” and the CEOWORLD “Logo” on my website and add CEOWORLD magazine in my LinkedIn profile’s “Experience Section” as an “Opinion Columnist.” and authority in the field.
On its own initiative, CEOWORLD magazine created on their website a library of Robert Adelson published articles. You can peruse this library and/or read as many of my 37 published articles as you wish. See https://ceoworld.biz/author/robert-adelson/
With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs, CFOs, CIOs, senior management executives, business leaders, and high net worth individuals worldwide.
It is my hope that this article will be of benefit to CEOs, C-level and senior executives who, at some point in your career, are offered equity interests in an LLC and need to know what to watch out for also what opportunities LLC interests can offer. Feel free to tweet or share this article. If you or any colleague of yours has a need in this area, please do reach out to me at 617–875–8665.