Carried interest agreements
Anyone have experience with these?
Generally do you need an attorney or accountant to review them when your company issues?
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Based on the most helpful WSO content, it's highly recommended to have an attorney review carried interest agreements when your company issues them. These agreements can include complex clauses, such as "kill switch" provisions that allow the company to revoke your carry even after it has vested. This can lead to significant financial implications, especially if you leave the company or if disputes arise.
An attorney can help you: 1. Understand the terms: Ensure you fully grasp the implications of clauses like clawbacks, vesting schedules, and forfeiture provisions. 2. Negotiate unfavorable terms: If possible, they can assist in negotiating clauses that might be detrimental to you. 3. Protect your rights: They can identify any non-standard or overly aggressive terms that could harm your financial interests.
Additionally, consulting an accountant might be beneficial to understand the tax implications of the carried interest, especially regarding clawbacks or post-tax adjustments.
If you're unsure about specific terms, it's always better to seek professional advice to avoid costly mistakes down the line.
Sources: What to pay attention to when signing a contract?, Starting small futures trading shop, 2023 Comp Thread RE, How Difficult Would It Be to Start A Hedge Fund After Two Years As Analyst?, Day in the Life: Hedge Fund Associate - Investment Banking Background
What level are you at? When I was an associate I didn’t even read them. I simply signed and returned because the terms didn’t matter and were non-negotiable.
Did you create and LLC to sign the agreement?
Nope, I signed them within a few seconds of receiving them. I did immediately file a section 83b election with the IRS since with our “unique” fund structure the initial grant was considered a transfer of property. Not typical tho as far is I know.
As a junior / mid-level, they're non-negotiable and many, many pages of legalese that basically advantage the author (your employer) and disadvantage you (the employee) .... so what's the point in spending $10k for an attorney to review it?
Good point - I think it would be more to understand tax implications, liabilities. Less to negotiate, but I see your point.
Do you need to set up an LLC to sign the agreement?
I don't think you need to, but it's a good idea and takes minimal time/money.
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