I recently did some fundraising and employee grants with an LLC and it was more complicated than you'd think... You should make sure your grants have a "distri

I recently did some fundraising and employee grants with an LLC and it was more complicated than you'd think... You should make sure your grants have a "distribution hurdle." If you don't have a distribution hurdle, the options you're granting may be taxed as income immediately upon receipt. This would leave your employees with a big tax bill. You should put everyone on a reasonable vesting schedule. With vesting, everyone is in it for the long-term and the shares given directly correlate to the work performed and the value provided to the company. You should talk with your employees and agree in advance to the work being performed in exchange for shares granted during the vesting period. There is no clean way to include this in the operating agreement or grant notice, so communication is crucial. If either party is ever dissatisfied with their side of the arrangement, however, they can always leave. And if you've set up vesting appropriately, both sides should still be happy even if you don't reach the end of the vesting period. Why would you want to prevent employee grants from diluting in the future? It breaks the alignment of incentives. If everyone dilutes equally, everyone has the same incentives regarding future investments. An investment would only be accepted if everyone thought the trade-off of money for equity was worth it based on the current valuation. But if you DO want to prevent dilution, it's a fairly straight-forward clause you can add to the operating agreement. I'd suggest setting a ceiling or an expiry date for the dilution prevention clause. This ensures that if things change dramatically in the future, you won't be handicapped by your non-diluted employee grants. Disclaimer: I'm not a lawyer. This is for entertainment purposes only. Don't sue me etc.