• October 2018
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How does vested stake work in an LLC?

It varies. LLCs are given broad latitude in structuring vesting terms however they wish as long as they comply with governing rules and regulations. It simply depends on the organization and what they want to achieve. Companies can choose whatever vesting schedules they want for each grant to an employee (different grants can have different rules).

With that said, many companies makes the mistake of believing they can template or DIY these programs only to learn costly mistakes. For example, LLCs don’t have stock per se. Instead, equity is offered either with a capital interest or profits interest. Capital interests enable an LLC partner to share in both the profits and a portion of the assets, whereas a profits interest entitles a partner solely to a share of the profits. There are some significant differences on return, especially if the company is sold.

Again, these are very complex arrangements that require legal assistance. Feel free to check out LawTrades where high quality legal guidance regarding vesting is offered to startups at affordable prices.

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