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    2 Replies Latest reply on Jun 6, 2009 12:04 PM by LUCKIEST

    Equity Grant/ Equity Bonus

    pathmaker Newbie

      How common is it for an owner to consider awarding equity as compensation and what kind of tax issues arise when you accept an offer.
        • Re: Equity Grant/ Equity Bonus
          ArcSine Scout
          Fairly common, actually...more so in larger organizations, somewhat less common in smaller companies. The classic underlying rationale makes a lot of sense in many cases: As an employee, I'm a lot more incentivized to do what I can to help juice up the profits of the company when I know that part of those additional profits will become jingle in my own pocket.

          The tax ramifications, though, would be very difficult to fully explore in brief forum bites. (When you say "...accept an offer" I assume you're asking about the employee-recipient's tax issues.) Equity comes in just about every flavor you can imagine (voting / nonvoting, Qualified Stock Options, vesting provisions, preferred vs. common....I could keep going until next Tuesday). And the tax consequences can swing pretty far and wide, depending on the precise mix of features embedded in the granted equity.

          Whenever an employer is contemplating setting up an equity-compensation arrangement with employees (a great idea in many cases, but it depends), Step One is to get solid tax and legal counsel. There's frequently some decent value to be had from such a plan--for both employer and employee--but it usually requires expert advice to fully tap into that potential value (and to avoid the numerous pitfalls).

          Best of luck!

 was early and I was full of no coffee...
          • Re: Equity Grant/ Equity Bonus
            LUCKIEST Guide
            Equity Grant/ Equity Bonus

            equity is a term used to describe the contribution made to a
            project by people who contribute their time and effort. It is used to refer to a form of compensation by businesses
            to their owners or employees. The term is sometimes used in partnership
            agreements where one or more of the partners contributes no financial
            capital. In the case of a business startup, employees might, upon incorporation, receive stock or stock options in return for working for below-market salaries (or in some cases no salary at all).

            The term is sometimes used to describe the efforts put into a
            start-up company by the founders in exchange for ownership shares of
            the company. This concept, can also be seen when
            start-up companies use their shares of stock to entice service
            providers to provide necessary corporate services in exchange for a
            discount or for deferring service fees until a later date