Frequently Asked Questions

Do an LLC's membership units “vest” like the shares of a corporation?

The nature of the membership relationship in an LLC is not conducive to taking a “one size fits all” approach to vesting – and in fact many LLCs do not impose vesting at all.

While it is possible to impose vesting on a member’s units in an LLC, this creates significant added complexity in the documents setting forth the LLC agreement. Unlike with a corporation, where there are standard “off-the-shelf” agreements for vesting arrangements, all vesting arrangements for an LLC need to be tailored to comply with that LLC’s Operating Agreement.

If you wish to form an LLC that provides for vesting on members’ units, you should work with legal counsel to form your LLC. Alternatively, if you plan to eventually convert your LLC to a corporation then it is straightforward to impose vesting in connection with the conversion.