What is Vesting?

Okay, so we have ABC tile and they're going to start this business together. Maybe they're brothers, maybe they're best friends of 10 years. They're super close and they trust each other through and through. And they're like, we're going to start this business 50 50, and it's going to be successful.

And we're both going to get rich and we're going to live great lives. As you probably know, this is not usually how it works out. Once you get more than one person in a business, the most excited and pumped and energy that's going to be in the businesses right before you get started. It's when it's just an idea.

Once the hard stuff gets rolling. How becomes angry. You're going to give him he's angry at this house and this hell is frustrated at this, how they both have their perspectives. This house is the worker. You can see he's the one behind the he's the one behind the, his, the office or the kiosk.

Maybe this is like a pop-up shop. Tile. I don't really know, but I love this little thing, but he's the, he maybe he's the guy that does all the work and in this house just is he talks a lot, but he doesn't actually do anything, but everyone thinks that he does every, a lot of stuff because he talks the most.

While this Hal over here is actually getting stuff done. There are 50 50 and a couple of years pass and this house has been doing the bulk of the work and this house. Really has been worthless maybe put, a lot of time in the first year. But then he just kinda got lazy and just was like, oh, okay all this business is happening.

And so obviously I'm doing stuff because it's the businesses growing. But in reality it's this guy that's doing all the work and keeping the business afloat. It happens. It's an age old story. It happens time and time again. And that's where vesting comes into this. I know I did a little roundabout there to get to what vesting is, but vesting is the idea of, instead of starting 50, 50 off the bat what you can do is say, I'm going to let maybe this Hal is a hundred percent owner and says Hey, hell number two, just to make sure that you are.

Going to put in your work, we're going to put you on a, usually it's three or four years of vesting. We're going to put you on a four year vesting schedule where you invest quarterly. Sometimes there's a one-year cliff. And so how has to work for an entire year to get the first of the four years of his vesting and then it vests every month or quarter after that.

And so then over time, how earns his other 50%. From this hell over four years, as long as he has proved moving himself. And that's kinda how you can do it. If this business was started by this, how, and then he's bringing on this, how, and it's still early stages in this house is going to provide a lot of a lot of help, what do you do if these guys are both starting guys or girls are starting at the same time.

You can have a. Written agreement ahead of time that says that, you each own maybe 0%. Okay, let's do this. I don't really know how this best works. Let's say he owns it, especially with an LLC. He owns 20 per 0%. He knows 0%. And then you've got like ABC holdings.

And ABC holdings owns a hundred percent. And if both this, how and this, how do what they're supposed to do, they vest into their their 50%, each long story short. This is where you need to get a real attorney involved in this kind of situation or do some more research because the idea behind vesting is that you don't get your entire.

Lump sum of equity right upfront, you have to, prove your worth, improve your metal to get it. And do some research on that. That is what vesting is. And so I'm going to stop there before I get into weird tangents and it's if bends and whatevers but hopefully you found this helpful if you have further questions or need me to expand on this comment below.

Like and subscribe it. It helps us get this video discovered by more people check out better legal.com for your LLC incorporation formation needs. Share us with a friend, family member. Every new business formation that comes in through the door is very helpful. Please do that. And I will see you on the next video.

More on GENERAL TOPICS

I don't need an EIN

You already have an EIN, can it be converted to your new LLC? Every new LLC needs a new EIN. The LLC you are forming is a brand new entity and requires a new EIN. Whether you have an existing DBA or other type of entity, you will still need a new EIN.

Benefits of a separate entity

Do you need a separate entity (LLC/corporation) for your business? Why not just be a sole proprietor? A separate entity can provide: Potential Tax Benefits - There are often significant tax savings that can be realized by setting up a separate entity. To begin with, it's simply easier to separate your deductible business expenses from your non-deductible personal expenses. But a properly-structure