San Jose Business Lawyers Blog
Equity compensation is an important tool employers use to attract – and retain – talented employees. Before you begin offering stock options, it is important to consider the amount of stock being issued to employees and how issuing it could affect the value of your business. There are many ways to structure an equity compensation package. Consult with a California startup lawyer to structure compensation packages that are best for your business, your future funding rounds, your shareholders, and your employees.
Before issuing any equity compensation, it is important to understand how this will affect the value of your business. Many businesses consider stock options as an inexpensive part of a compensation package. There is no accounting cost and no cash outlay required, so stock options might seem like an attractive option. There is even an added tax benefit: the difference between the stock price and the exercise price is a tax deduction to the business. But the National Bureau of Economic Research reports that this perception does not form an accurate picture of the actual economic cost of stock options. Understand the long-term costs of stock options – and how they will affect the valuation of your business over its lifetime – before making any decisions about how many employees will be awarded what amount of stock options.
The Total Percentage of Your Employee Stock Options