Keeping owners, managers, and stakeholders up to date on issues affecting their businesses.
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This post discusses some of those consequences. In short, the added costs and responsibilities of adding another member should be considered carefully before switching from a single-member LLC to a multi-member LLC.
Employee stock options are a type of equity compensation that provides the employee with the right to buy employer stock at a specified exercise price at the end of a specified vesting period. The exercise price of a stock option is typically the fair market value of the share of stock at the time the option is granted. The vesting is commonly time-based (or, less often, performance-based). Options are exercisable for a specified exercise period after the option vests, typically for five to ten years.
The discussion below describes two types of equity-based compensation that are based on, but do not actually grant, equity (though both could be drafted to add a conversion feature to turn compensation rights into true equity). For simplicity, the discussion focuses on stock but the concepts below generally can apply to all types of equity.