Inc.com - How To Guide for Recruiters: Equity as Compensation - 6 Aug 2009
Equity as Compensation
Think of equity as a new American currency. Employees today
frequently expect stock options as part of their compensation mix, and
service providers often take equity stakes in promising start-ups as
part of their fee.
But both taking and giving equity are risky and complex propositions. In his article How to Take Stock in the November 2000 issue of Inc.
magazine, Ilan Mochari shares the story of Robyn Sachs, who knows about
the risk involved with taking equity for services. Sachs's PR firm, RMR
and Associates, received equity for services, only to see the value of
its shares plummet along with the stock market. On the flip side, The Takeover, a story from the Inc. magazine archives, highlights some of the potential pitfalls of giving equity as compensation.
Given the risks involved, how does a business owner give or take
equity wisely? This guide uncovers inc.com's best resources on this
complex subject.
Put It in Writing
If you're sealing your deals with a handshake, beware. When it comes
to handing out equity, putting the details in writing is always your
best bet.
- Granting Options Like It's 1999
- New rules do little to dampen private companies' use of stock options.
- Valuing Private Company Stock
- How many shares should you issue? How do you price them? It all depends on what you're up to.
- Avoid Being Stuck by Stock
-
Giving equity can be a great way for small, growing companies to
recruit and keep talented workers. But if you grant stock, without
writing sound shareholder agreements, you could be setting yourself up
for trouble.
- Hot Tip: Stock Options
-
Worried that employees will use the proceeds from their equity stakes
in your business to start their own businesses? Here's one
entrepreneur's approach.
Equity as Compensation for Service Providers
Before you take part of your fee in equity -- or offer equity in
lieu of cash to a service provider -- make sure the deal makes sense
for your company.
- How to Get Rich in America
-
By receiving equity as compensation from clients, Lunar Design gained
equity stakes in companies that it hopes will be worth much more than a
straight fee-for-service payment in the long run.
- Risky Business
- When does it make sense for a company to begin thinking about swapping work for equity? A Wharton professor a
- more...http://www.inc.com/guides/hr/20697.html
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