Limited liability companies (LLCs) sometimes award employees and contractors a unique form of equity-based compensation known as “profits interests.” These interests aren’t actively sold on a public market, so a customized valuation approach is required. Here’s an overview of how business valuation pros determine what these awards are worth for tax and financial reporting purposes. The basics Finding skilled workers is one of the top challenges reported by private businesses today. Employers may award various forms of equity-based compensation to help attract, retain and reward workers for their contributions to the company. LLCs aren’t allowed to issue traditional corporate forms of equity compensation, such as common and preferred shares, stock options, restricted shares and phantom stock. Instead, they can award profits interests to certain employees and contractors for...