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I don’t see a lot of LLCs taxed as corporations, so the requirement that it be an option with respect to the stock of a corporation isn’t usually met.
IME, you don't usually see it because a PE sponsor typically wants people to vest on a change in control, meaning the participant can't meet the ISO holding period requirement, meaning they'd just lose ISO status anyway. So why bother setting up the plan to allow it.
There are also profits interests. Our tax team seems to think the structure is ok. I’m hesitant (i’m ECEB) since the options technically have preferential treatment over the profits interests. Unsure if the options would fall under the liquidation exception.