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.
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.