Wednesday, May 21, 2003

LLC VERSUS CORPORATION: OWNERSHIP INTERESTS It is possible to own an economic equity interest in a Corporation, yet not be a Shareholder. It is also possible to own an economic equity interest in an LLC and not be a Member. With an LLC, you might simply provide (in the LLC Agreement) that owners of what you might call "Units" or "LLC Interests" (which would be denominated like shares) are not Members unless they are "admitted" as Members. This seems easier than in the corporate context which would fall back on some Shareholder agreement to technically forbid the transfer of stock without approval of the Company. The SH agreement would say that any non-approved transfer of stock would be void....but that certainly isn't as clean as the LLC situation. And I don't even want to get into Phantom Stock, which isn't stock at all.

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