What is equity compensation and how does it work for startups?

What is equity compensation and how does it work for startups?

Equity compensation is a form of non-cash pay that represents ownership in the company. Startups often use it to attract and retain talent.

What are the different types of equity compensation?

The main types include stock options, restricted stock units (RSUs), and employee stock purchase plans (ESPPs). Each has its own benefits and tax implications.

How do stock options work?

Stock options give employees the right to purchase shares at a predetermined price, known as the exercise price, after a vesting period.

What are the tax implications of equity compensation?

Tax implications vary by type of equity. Generally, stock options are taxed when exercised, while RSUs are taxed when they vest.

Can equity compensation be a good incentive for employees?

Yes, it can align employees' interests with the company's success, motivating them to contribute to growth.