Introduction
Equity compensation allows startups to attract and retain talent without paying large salaries upfront. Grants of stock, stock options or other equity-like instruments align employees and contractors with the company’s long-term success and can deliver significant tax benefits if structured correctly. However, mistakes around vesting schedules, fair market value, and tax elections can create unexpected taxes and disputes.
Key topics covered on the blog
- Section 83(b) elections — Understanding when and how to file an 83(b) election is critical for founders and early employees who receive restricted stock. Without an election, you may owe tax as your shares vest rather than up front.
- Stock option plan administration — Properly granting options requires board approvals, written agreements and compliance with securities laws. Self‑administering option plans without counsel can lead to mistakes.
- Incentive Stock Options (ISOs) — ISOs can provide preferential tax treatment but come with strict rules: they may only be granted to employees, no more than $100,000 can become exercisable in a calendar year and shares must be held at least one year after exercise.
- Other equity vehicles — We discuss restricted stock units (RSUs), profits interests and phantom stock, and compare their advantages and disadvantages.
If you’re designing an equity compensation plan or have questions about options, vesting or tax elections, feel free to reach out. We have advised countless startups on structuring equity compensation that balances incentives with compliance and tax efficiency.
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- Schedule a consultation — Book a time on our calendar to discuss your specific situation.
- Contact us — Reach us directly via our contact page.
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