Yes, exactly. The start-up I joined did this with a fair vesting schedule. Now I own actual stock in the company without having to pay any cash to take ownership of them. One issue we've found, though, is that early employees have less of a reason to stay on once they become vested. With options, as long as they're employed by the company they don't have to exercise. If they leave, they have only a short period of time before they have to come up with the cash to buy their shares.

One other downside is that an LLC can't go public, so if the company decides to go that route they'll have to reorganize to a C-corp. Of course the lawyers love this because the paperwork required is significant.