4 ms·
Be extremely careful if somebody offers you a share in LLC first, but later presses to convert to C-Corp, giving you Class B/non-voting/non-privileged shares. E
by bitL 9y ago
Be extremely careful if somebody offers you a share in LLC first, but later presses to convert to C-Corp, giving you Class B/non-voting/non-privileged shares. Even with the same % as you had with LLC, it's a highway robbery for multitude of reasons. Some large companies, loved over here, are surprisingly doing this with their spin-offs, threatening non-compliant employees with legal action if they don't sign the transfer. Stories I was told...
- david38 9y agoTell us more
- eldavido 9y agoDude seriously what the hell are you talking about? Almost anyone who gets employee-level equity in a standard DE C corp will receive such a small piece that the voting rights are largely irrelevant. I was a sub-1% shareholder in a recent M&A transaction where a place I'd worked was getting acquired. I didn't like the terms. Too bad it mattered exactly zero what I thought. The real question is why a company that's taking a bunch of capital is incorporated as an LLC? That's a rookie mistake no founder associated with any reasonable incubator or investors would make.
- bitL 9y agoSometimes you get >= 1%. That's when the fun, or "Game of Thrones" starts, once vesting period nears its end. You'd be surprised how many "decent" management people turn into monsters once they sense more equity for themselves by tricking you (i.e. getting preferred stock for themselves, giving you a type with the lowest liquidation preference etc.). LLCs are often used for early stage private companies with a single investor (e.g. a large, well-known company), not those that want to go public.