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I'm new to fundamentals of stock/equity. I have got an offer from an LLC company and the recruiter is saying they will allocate me Accelerated Incentive Units(AIU) which is intended to be treated as Profit Shares for a future valuation of the company( say 5B) which I learned from various public blogs, is almost double the current valuation(2.8B). I read about the Profit Shares and learned that those are only applicable from the vesting day onwards and only if the value of the company increases and all I could understand from various posts is that its beneficial for employees as it helps to save on tax. However, I could not learn the cons of it. Just wondering what would be the case :

  1. If the value of company does not hit at which I'll be granted the AIUs and what if that starts decreasing ?
  2. Would all 4 years of my units be at the same valuation or it would change as per the value at the time of vesting.

Any more advice, easy to understand blogs to learn more about it would be very helpful.

Thanks very much in advance.

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Here are some web resources to understand AIUs for LLC employees:

An employee or service provider who is granted an LLC profits interest receives a right both to the future profits of the LLC and the appreciation in value of the assets of the LLC. At the time of the grant, the profits interest holder is not entitled to share in the value of the enterprise up to that point in time and therefore the grant will not result in taxable income to the recipient. Unlike an equity grant, however, the LLC does not receive a compensation deduction for the grant of a profits interest.

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  • Thanks very much for responding and providing the references. Just want to clarify one thing more, what would happen if the company gives Incentive Units for the future value, will I not get any profit share until company reach to that value ? Also what would happen if the company value goes south What I might get in terms of stocks if the company goes public ?
    – Learner
    Sep 16 at 2:29
  • We don't know enough about your plan to answer. Unfortunately, neither do you, unless you have it provided to you and you've read and understood it. A place to start may be to ask company HR to provide the plan to you, or at least to explain it to you. Sep 16 at 4:40

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