Lesson 4 of 4
In Progress

Recommendations and Q&A

Um, so I mentioned this earlier, I know it’s 4 0 2 if you have to go, I’m really sorry, but I want you to talk to other people. So some of the stuff, you know, these are things that we can do, we can help you with. Like we, we do partnership operating agreements all the time. We, um, help people form businesses, but a lot of these have other implications. They have tax implications, they have financial planning, estate planning. So these are all the people talk to a business mentor, another business owner that has a model that you admire. Like if you see a business and you’re like, wow, it’s really great, um, chances are they’ll tell you like, this is why we went with this model and here’s how we did it. Um, you probably wanna talk to a financial planner, a bookkeeper, a tax accountant, a tax attorney, a state planner, an HR professional, um, resource center.

Atty Michael Jonas (46:42):

So that, that resource that I gave you is the national center for, um, employee ownership. They have a really a lot of great, um, videos and articles and things like that. Um, so again, I, the takeaway from this is that if you’re looking for something to do with shares and equity and a little more complicated, you can do one of those, uh, employee owned trust or that ESOP plan. If you’re looking for something that is, uh, more communal than that would probably be a worker cooperative. Um, if you’re looking for something that is the easiest, that would be granting equity or membership interest right away, um, to, to an employee. Um, and then determining whether or not they are also a partner and have liability or a management role or just have, um, the ability to get dividends or ownership distribution. It looks like there were some questions. Um, yeah, so, so Phillip, you said, do we have contact for local accountants that may have experience? We do. Um, we have a really good referral email. Um, folks have experience in that. Um, answered of the equity question, do ownership, so Tracy, you’re asking do ownership distributions have to be made on a schedule

Speaker 6 (48:20):

For the member, the LLC memberships specifically?

Atty Michael Jonas (48:24):

Yeah, if it says, says in the partnership operating agreement, what that schedule is, then yes, they have to be on a set schedule. If it doesn’t say that, then you have to hold a vote to determine whether or not you’re ready to do an ownership distribution. What we usually do is when we write a partnership operating agreement, um, we put in there that, um, the company has to have this amount of money, has to pay their overhead. We could also put in there in the first year, you won’t be taking an owner distribution or, uh, so we, we basically, if we don’t give dates or time, we give the status that the company has to have in order to do that ownership distribution. Does that make sense?

Speaker 6 (49:10):

That does make sense. Um, I have a couple other questions if you don’t mind, about policies. Um, are those typically things that, um, the employees buy into and is it, is it common for buybacks to occur when an employee leaves? Or how does that work?

Atty Michael Jonas (49:28):

So the, the you’re employee, an employee could be an owner as well, like you’re an owner and you’re hired hourly. Um, so the answer is that all of these things are possible, like you can make it so that an employee has to pay into it in order to get their, their interest. Um, you can make it so that you grant granted to ’em upon hire. You can make it so that when they’ve worked there for a certain amount of time, you offer them a percentage. Um, and then in terms of buybacks, we can make it so that if someone leaves that they’re not gonna get that. I mean, to answer your question, all of those things are possibilities as long as they’re contracted for. And the communications there, there’s a lot of flexibility is what we can do with membership interest for employees.

Speaker 6 (50:25):

Ok. Um,

Atty Michael Jonas (50:26):

Complicated things are when we’re dealing with a trust fund or we’re dealing with corporate equity that that incorporates, um, and treasury rules. So LLCs actually have a little bit more freedom than what to do with ownership. Mm-hmm. <affirmative> have the same, um, stock rules.

Speaker 6 (50:43):

So what does, um, what is the process if there’s a business that’s interested in pursuing that? Um, who, I mean you need to meet with a lawyer, a tax preparer, all these other people. Uh, I’m curious what legal documents are required and like what if someone came to you to rational you card and say like, I wanna do this with my business. I’m ready. What would you

Atty Michael Jonas (51:07):

Yeah, so the more so the more complicated ones, I would probably wanna work with your accountant or your financial advisor. So it would be that we would have the legal component, we would have the financial component, um, and the tax component. And when I say talk to all people doesn’t necessarily mean all at one or you need them all. It’s more of, for example, like if you’re incorporating one of these plans into your hiring processes, you might wanna talk to an HR person, you know, see how that, how that would play out. So it’s kinda like that. But um, essentially if you doing one of the plans, like you’re doing the, we could file a worker cooperative for you or we could convert your current business into that, and then we would help you with the governance documents. So for worker cooperative, you would make kind of like bylaws, you make governance documents where, um, you get everybody kind of like a nonprofit.

Atty Michael Jonas (52:01):

You get everybody who is a worker to agree to the initial governance documents. And then as it rose, um, the, the cooperative would vote on changes to those governance documents. So we would help with that for an llc. Um, if you’re giving out whether someone’s a partner or you’re giving them out membership interest, we have a couple options there. We can, we can form a business and we can add them to the Secretary State site. We can do a partnership operating agreement where we would detail whether or not they have liability or whether or not they’re gonna be a partner, what their rules are. Um, so we, we would do that all contractually as well. So, um, this first question would be like, which model seems likely something you would do? What are your concerns? Um, and is this something you wanna do right away or is this like a future thing you wanna do?

Atty Michael Jonas (53:03):

Um, and then if it, like I said, if it was one of these more complicated things, we would probably loop in a financial advisor or someone else. And the reason is, cause we as a law firm, we can’t serve as a trustee or we can’t, you know, there’s things that we can’t do that we would wanna loop in someone. Um, the other thing is that these things have to reconcile. So if you have a will, but then you create a business model that doesn’t reconcile with your will, then we have to have your estate planning person, you know, see how these all kinda have to, um, or like if you have, uh, if you’re married and your spouse owned 50%, they would own 50% of your ownership. And then they don’t get an ownership if you’re giving it out. Like they don’t get the partner giving to your employees.

Atty Michael Jonas (53:56):

And so if you, if you have two competing documents where your spouse thinks they’re getting half of the whole company, not half of your share after you’ve given it to your employees, then those two documents don’t reconcile. So that’s another piece of this is like, when you plan these things, when you plan, um, an employee owned business, you have to make sure that all the other pieces reconcile with one another so that they’re hel they’re, you know, there isn’t, we don’t want your your will to go to probate cause this plan interferes with that, or something like that, if that makes sense. Um, yeah, I mean that, that’s, that’s, that’s the, the presentation, y’all. I, again, sorry that some of these things are more complicated and take time. The synthetic equity one is the most complicated. Um, feel free to shoot me an email to, to ask any questions and, uh, happy, happy to see you all today. I hope you have a good rest of your day.