Direct Equity Wrap

Overview

Wrapping directly held equity — 83(b) shares, exercised stock options, restricted stock that has fully vested — into a DOIV LLC produces a Position Object that is transferable, pledgeable, and queryable on DMTR.

This takes a position from L3 (Restrictions) to L4 (Wrapped) on the fidelity spectrum.

Prerequisites

• Shares are fully owned (vested, exercised, or 83(b) election filed)
• No outstanding liens or pledges on the shares (or encumbrances are disclosed and will be encoded)
• Holder has access to the stock certificate or can obtain a lost-certificate affidavit
• Holder has reviewed the company's transfer restrictions (ROFR, board consent, information rights)

Step 1: Register the position at L1-L3

Before wrapping, the position should be registered in the DMTR registry with identity, economics, and restrictions encoded. Use the Register First Position guide to:

1. Upload the stock purchase agreement or option exercise notice
2. Extract issuer identity, share class, quantity, and cost basis
3. Encode transfer restrictions from the company's charter, bylaws, or stockholder agreement

At this point the position is at L3 — evaluable by the Rights Engine but not yet transferable on-platform.

Step 2: Form the DOIV LLC

DMTR automates entity formation via the @dmtr/entity package:

• Entity type: standard Delaware LLC (not Series LLC — that is for LP interest lookthrough)
• Name: typically AV [Company Name], LLC
• Operating agreement: generated from the DMTR template with Transfer Agent designation, restriction encoding from Step 1, and ITAR/CFIUS acknowledgments if applicable

Estimated cost: ~$640 (filing fee + registered agent).

Step 3: Execute the contribution

Two documents are generated and executed:

1. Contribution Agreement — the master document covering:

   • Description of the contributed shares (class, quantity, par value)
   • IRC 721 non-recognition treatment and tax basis carryover
   • Assumption of existing restrictions
   • Transfer Agent designation
   • ITAR/CFIUS acknowledgments if applicable

2. Stock Power — the standard instrument that irrevocably assigns the shares from the holder to the DOIV LLC

Both are generated via @dmtr/legal templates and routed for e-signature via the DMTR signature workflow.

Step 4: Cap table assignment

After the contribution documents are executed, the company's cap table must be updated to reflect the DOIV LLC as the new shareholder of record.

DMTR supports this through the CapTableProvider interface:

• If the company uses Carta, Pulley, or AngelList, the assignment can be recorded via API
• Otherwise, DMTR generates a cap table instruction letter for the holder to send to the company's transfer agent or stock plan administrator

The cap table update is the step that requires counterparty cooperation. The company must acknowledge the SPV as the new shareholder.

Step 5: Register the DOIV position

Once the cap table is updated, the DOIV membership interests are registered as Position Objects:

• asset.vehicle_class: doiv_membership_interest
• provenance.acquired_via: contribution
• provenance.brownfield_source: records the original holder, share class, cost basis, and holding period start
• transfer.restrictions: mirrors the company's original restrictions, enforced by the Rights Engine
• status: active

The position is now at L4 — transferable on-platform via DMTR settlement.

Tax treatment

The contribution of shares to a single-member LLC is a non-recognition event under IRC 721. The LLC is disregarded for federal tax purposes. The holder's tax basis in the shares carries over to the membership units. The holding period tacks under IRC 1223(1).

If the LLC later admits additional members, it becomes a partnership for tax purposes. The contribution remains non-taxable under IRC 721, but IRC 704(c) allocation rules apply to any built-in gain or loss at the time of contribution.

What the holder gains

Related

• Brownfield Onboarding — The fidelity spectrum and design rationale
• LP Interest Wrap — Pattern 2: fund LP stakes
• GP Stake Wrap — Pattern 3: GP interests
• Register First Position — Initial position registration