It's likely technically a security under federal law, so exchanging the interest for value opens you up to the same types of issues if you just sold it to a third party. That means a lot of risk disclosure, etc. You'll also have some duties to him on an ongoing basis and you'll need to prevent him from being able to transfer, etc. That can get very tricky in the presence of transfers by law (e.g. pursuant to divorce). A good corp lawyer will have precedent addressing these things, but it will cost you. If you have to go this route make sure you have the ability to boot him at your discretion (rendering it basically worthless) or at a minimum, on "cause" by him. You'll need a confi in there in addition to carving out most of the default LLC rights under the relevantly statute (ideally Delaware). Just give the guy cash.