Phantom Equity vs. Profits Interest
Phantom Equity and Profits Interest are both ways to offer employees or partners a stake in a company without giving actual ownership.
In Phantom Equity, employees get virtual shares that replicate stock ownership but don’t provide actual equity. When a company hits certain goals, employees receive a cash payout based on the company’s valuation at that time.
Profit Interest is a form of equity given in LLCs where employees share the profits generated. It is often used as a tax advantage.
When talking about Phantom Equity vs. Profits Interest, it seems like we are in the VIP box of a sports team; we are involved but don’t actually own the team.
