Equity Compensation for Limited Liability Companies (LLCs) - Softcover

For many years, the most common advice on sharing equity with employees in a limited liability company (LLC) has been switch to S corporation status instead. The argument was that it was too complicated to share equity in an LLC. Yet many LLC leaders want to share equity with employees and have very good reasons for retaining their company's status as an LLC. When we at the National Center for Employee Ownership (NCEO) asked experts in employee ownership law if it were possible to share equity in an LLC, the usual response was yes, but it is complicated. No one seemed to want to go into too much detail about just what these complications were, however.

This book exists so LLC owners and their advisors can finally get answers. It is, we believe, the only detailed exploration of equity compensation in LLCs available. The book starts with a general description of LLCs and an overview of the ways to share equity. Chapter 2 explores alternative approaches to designing plans. Chapter 3 provides more detail on the specific ways to share equity in an LLC, with a particular focus on tax issues. Chapter 4 describes the accounting issues. Chapter 5 describes equity sharing methods available in S or C corporations so readers can judge whether the broader range of choices for such corporations justifies switching from LLC status. Finally, the appendix provides a model LLC equity compensation plan, which is included in word-processing format on the book's CD-ROM.