Do We Share a Common Interest?

Written by James Sanders

I often get calls from clients who ask about granting their employees options or stock in the company.  The biggest issue I raise is the fact that most are formed as an LLC or Partnership.  I tell them that a profits interest is a possibility, to which I get that look of confusion.  So, what is a profits interest? 

Essentially, it’s an ownership interest in a partnership or LLC that gives the recipient the right to a percentage of future profits. It’s often granted to a partner or senior manager in exchange for services they provide to the company.  There is more to this type of equity grant and I think the attached memo drafted by Attorney William Schroeder from our firm provides an excellent overview.

If this type of compensation is of interest, I highly recommend you chat with your professional business counsel.  It will help you and members of your team share a common interest.

Next week we will get into options.