How to partition a nascent start-up with potential for several divisions?

[Michel A Audette]

Jurisdiction

Virginia

Dear legal experts of the forum, I am a professor and a biomedical engineer, in Virginia, owner of a start-up (an LLC) that currently does nothing... I have several interests in computer-assisted medicine related to my research, including scoliosis surgery planning with ligamentoskeletal model of the spine, interactive haptics-driven simulators for neurosurgery and obstetrics, and geriatric fall detection for injury mitigation. I plan on pursuing SBIRs and STTRs over time, to kick-start this entity.

I plan to give an equal portion of the shares to a talented PhD graduate of mine, to continue as a partnership, and I would also like to reward future collaborators along the way, which will mean setting aside roughly a third of the ownership for other collaborators. Is it possible to associate ownership with a division of an LLC: scoliosis surgery planning division, neurological sim division, etc., whereby my student and I would each hold a third of all divisions, and we would allocate the remaining third of each division to interested collaborators?

Thanks for your kind support.

 

[Zigner]

You can't "set aside" a portion of the LLC, but you can organize your LLC in such a way that new members can be added. You should seek local legal counsel for assistance.

Best of luck to you!

 

[adjusterjack]

Seems to me that these "participants" would be performing "work" for you and may be "employees" which raises its own set of issues.

 

[Tax Counsel]

Is it possible to associate ownership with a division of an LLC: scoliosis surgery planning division, neurological sim division, etc., whereby my student and I would each hold a third of all divisions, and we would allocate the remaining third of each division to interested collaborators?

Thanks for your kind support.

You could form a separate LLC for each business and allocate member interests in each one in the way you indicate, adding new members to each as desired. You might start out by having all the LLCs owned by a parent LLC that you and your student own 50% each, and then parcel out ownership of the child LLCs to add new people to a particular LLC. That's just one possible way to do this. There are others. I suggest you consult a business attorney and a tax professional about this so that you can achieve your goals with the least tax cost for you, your student, and future investors.

 

[Michel A Audette]

Thanks for all of your comments. Best wishes, Michel