Profits Interest in a new LLC Start-up for an Executive Seeking Ownership Stake?


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I've have been asked to head-up and manage a start-up LLC as the President/GM and sit on the board. I will have a base salary package and bonus plan; however, I've asked for an ownership stake in the LLC without having to contribute capital and be subject to capital calls. Would a profits interest be the best way to acheive this? Any other thoughts or comments appreciated.

Equity Compensation

asked Jul 18 '11 at 01:30
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Robert
1 point

1 Answer


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Robert, I dont like profit interests because they can leave a CEO and the ownership with misaligned incentives.

I would like to back tracking a little bit about the ownership stake.

You dont have to worry about contributing capital unless you choose to participate in those options. Most options expire 30-60 days after you leave a company and if you remain at the company you can purchase them for a decade after they vest.

Profit Interests may be your preferred choice but you need not necessarily worry about contributing capital in the short term with unit options.

answered Jul 18 '11 at 02:58
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Martin Floreani
51 points
  • so basically a profits interest of 4-10% of the future profits – Robert 9 years ago

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