Questions

Does Phantom Equity for LLC makes sense ?

Hi. We are an early-stage Social Media based start-up incorporated as LLC and have beta ready. In order to go to next level, we need to get some key hires on board. We are contemplating how to give them equity based compensation and if Phantom/SAR based equity makes sense ? Please advise.

3answers

Thanks for asking this question, its a good one with little answers out there. Having been a phantom equity partner in a start-up myself, I would say phantom equity didn't give me the push to be all in as much as real equity would have. I never felt like a true partner. Reason being, the owner wasn't fully committing to me, so how could I with him. If you have the right potential partner who's quality and is going to come into your start up with all their time and heart, equity will pay off. A SARs based system works great for entry level employees that join early. Helps to justify the risk on their end. Good luck.


Answered 6 years ago

NO. NO. NO. NO. NO....

How about phantom food or phantom air or phantom beer? COME ON. If you want to invest in a valuable employee then jump in with feet or you'll end up with phantom success...


Answered 6 years ago

A phantom equity grant essentially gives the recipient the right to receive a cash bonus equivalent to what they would have received if they held a profit interest. However, the holder is not a member of the LLC and has no equity interest.


Answered 6 years ago

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