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 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 finally makes detailed material available on equity compensation in LLCs. It not only explains all the issues around LLC equity compensation but also includes a chapter on considerations in drafting a plan. In the third edition, the book has been substantially revised and expanded. The main chapter, on equity interests in LLCs (chapter 3), was replaced by a new chapter from a team of experienced attorneys. Another new chapter (chapter 4) discusses how to allow LLC equity interest holders to be treated as employees. The plan documents in previous editions have been replaced by a new chapter that discusses drafting considerations for LLC equity plans. Finally, the existing chapters on LLCs, designing equity incentives, accounting, sharing equity with employees, and communicating have been updated.
