So You Want More Commitment

Written by James Sanders

Are your employees bought in to your company and its strategy?  Of late, we have received questions related to setting up equity incentive plans beginning in 2026.  However, are these the best forms of compensation for your staff and service providers?  How do you grant this ownership without giving up control?  What happens to their “ownership” when someone leaves your company? 

Over the next few weeks, we are going to provide answers to these questions and give you some insight into the various types of equity grants including the following: 

• Profits Interests – A profits interest is a partnership interest that gives the recipient the right to a percentage of the company’s future profits and appreciation.  
• Restricted Stock Units – A promise to give employees company stock or cash after a vesting period or if they meet certain performance goals. 
• Stock Options – An agreement that allows employees to buy a set number of company shares at a predetermined price. 
• Restricted Stock – An arrangement where employees can buy company shares at a discount, fair market value, or sometimes for free. 
• Phantom Stock – An arrangement where employees receive “mock stock” that goes up with the company’s stock price, giving them profits without giving them ownership in the company. 
• Stock Appreciation Rights – An arrangement that gives employees the right to increase the value of a specific number of company shares over a set period, without having to purchase any stock or exercise any options. 

Like anything else, these types of compensation tools should not be implemented without input and help from your professional business advisors.  Next week, we will start with profits interests and other types of partnership or LLC related equity compensation structures.