Can LLC compensate an employee through units of equity (ownership)?

[rzheva]

What is the name of your state? MA

LLC propses me, as its employee, a compensation through units of equity (ownership) instead of salary. However, according to the LLC Agreement, the LLC is 100%-owned by a sole Memeber. How does the scheme work? Can I participate in profit division if, according to the same agreement, all profits of the company shall be shared according to the 100%-percentage of interest that, in fact, a sole memeber owns?

 

[HomeGuru]

What is the name of your state? MA

LLC propses me, as its employee, a compensation through units of equity (ownership) instead of salary. However, according to the LLC Agreement, the LLC is 100%-owned by a sole Memeber. How does the scheme work? Can I participate in profit division if, according to the same agreement, all profits of the company shall be shared according to the 100%-percentage of interest that, in fact, a sole memeber owns?

**A: yes it is a scheme. Cash talks and as am employee, the employer must follow the labor law. Shares in the private LLC would be non-negotiable where you bank, correct?

 

[JETX]

Yep, it would be extremely hard for you to try to sell those shares given to you as compensation.... especially when the ONLY buyer can be the LLC!!

 

[rzheva]

Yep, it would be extremely hard for you to try to sell those shares given to you as compensation.... especially when the ONLY buyer can be the LLC!!

Thank you JETX,

Thus, it means that if the LLC gets some profit it's not necessarily that I'll get a part of the profit, doesn't it? Why does the LLC make me such a strange proposal? Why doesn't the LLC propose me to become a Memeber if it's really interested in my experience and profesional input?

 

[JETX]

"Thus, it means that if the LLC gets some profit it's not necessarily that I'll get a part of the profit, doesn't it?"
*** Correct. The distribution of any 'profit' would be determined by the LLC.

"Why does the LLC make me such a strange proposal?"
*** Ask them. But I would assume it would be because you are a foreigner without any knowledge of corporate law and not realize that the 'offered ownership' is virtually worthless.

"Why doesn't the LLC propose me to become a Memeber if it's really interested in my experience and profesional input?"
*** Can you say, "Free labor"?

 

[rzheva]

Originally posted by JETX
"Thus, it means that if the LLC gets some profit it's not necessarily that I'll get a part of the profit, doesn't it?"
*** Correct. The distribution of any 'profit' would be determined by the LLC.

"Why does the LLC make me such a strange proposal?"
*** Ask them. But I would assume it would be because you are a foreigner without any knowledge of corporate law and not realize that the 'offered ownership' is virtually worthless.

"Why doesn't the LLC propose me to become a Memeber if it's really interested in my experience and profesional input?"
*** Can you say, "Free labor"?

Thank you again, JETX,

Yes, you are right...

One more question (I would strongly appreciate if you could prompt this):

Is a memebership in the LLC the only convenient and legal way to secure my, let say, offered 10% share in division of profit?

 

[JETX]

"Is a memebership in the LLC the only convenient and legal way to secure my, let say, offered 10% share in division of profit?"
*** No. Get any offer to share in profits in writing from an authorized party (board member, director, officer, etc.). And be sure that the specific procedures for determining 'profits' are detailed. There are huge companies, making incredible money, yet they never seem to report any 'profits'.

Better yet, tell the person you want a regular paycheck.... and he can keep his promise of shares in his private little world.