Equity Compensation For Private Companies: The Six Pitfalls To Avoid

INTRODUCTION

In privately held companies, equity compensation – the granting of stock options, restricted stock, and other instruments tied to future compensation – offers a tremendous advantage in attracting and retaining talented employees. However, thanks to myriad laws and regulations around the world, equity compensation is also one of the most difficult challenges that spans finance, legal, tax, and HR disciplines.

For private companies, those challenges can be more acute because they create a disproportionate burden on typically leaner organizations that still must avoid or minimize the equity compensation traps and pitfalls, and stay in compliance. The following white paper describes several prominent and common pitfalls that private companies will want to avoid in the design and administration of their equity incentive plans.