Keeping owners, managers, and stakeholders up to date on issues affecting their businesses.
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.