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How can I leave LLC as a co-founder and retain some value for my work?

Answers

Braun Kiess
Title: CFO
Company: Robotic Systems & Technologies
(CFO, Robotic Systems & Technologies) |

Easy, just keep some amount of equity (units) for the time / effort you have contributed to date. You will need to trust that your other co-founders won't dilute so be sure you leave on good terms.

Topic Expert
Kent Thomas
Title: Founder
Company: Advanced CFO Solutions
(Founder, Advanced CFO Solutions) |

Braun gives good advice. I've found that if you are reasonable about the value contributed and are willing to forgo the balance, most co-founders and investors will be reasonable as well. Remember that the real value of a founder is her/his commitment to the company and the team for the long haul when things are tough, to work with little or no compensation and to figure out the business & revenue models to make the business successful so If you're not willing to do this, don't expect too much value to be attributed to what you've done so far.

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

I hope you all had formal founder equity purchase agreements that addressed vesting or buy back requirements in the event of early departures. Assuming that the membership agreement covered vesting and you qualify to vest , say, 25% of your total equity, then the LLC would have the option to buy back the unvested portion of your holding, leaving you with a 25% holding. You then need to draw up formal financial statements, identify the value of each member's holding and prepare k-1 worksheets for every member reporting the shares of total income allocations between members as of the date of your departure. For the balance of the year you will be allocating income under the new membership %s.
generally I don't recommend LLCs for start up companies with multiple founders because of the complications caused by changes in investor/ member ownerships and new investors/ members are brought in, and old ones leave!

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