I don't understand -- how would vesting have helped? If you can't fire the other person, vesting doesn't help when you have dead weight in the cap table. It sounds like the only remedy is your friend should have had hard conversations earlier when the other partner had less leverage...
Actually vesting would have reduced the other partners leverage greatly. First, they would not have been an LLC, would have already been a C Corp. The partner was refusing to sign the transfer docs so they could become a C corp to leverage outside investment, and give employees option agreements. If they had been a C corp, my friend would have gained more shares with every investment, and could fully control corporation decisions. Vesting also would have made it more clear to his partner how little equity he yet had, and more amenable to working together.
But outside my example, starting any new idea as a 50-50 partnership without vesting requirements is a terrible idea.
But even if they had been a C corp, vesting or no vesting, it sure sounds like they were both still employed so it still would have been a 50-50 equity split. Thus your friend couldn't have ordered anyone around? In order for vesting to help, someone has to be no longer employed and thus no longer accruing equity.
I'm not arguing against vesting, but I don't understand your example.
A C corp can compensate my friend with more stock i.e. voting control for his massive cash investments, an LLC is quite a bit harder when they are both partners.
