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Stock Option Plans, Restricted Stock, Phantom Stock and
Other Incentive Plans
for Closely Held Businesses
Article #1 – Overview
This
series of articles explains how restricted stock, stock
options, cash plans, phantom stock and stock appreciation
rights really work for closely held companies, and what
their real value is for the company and the employee. This
subject – how closely held companies use employee incentive
plans (like stock option plans) – is a tricky subject that
few people know anything about. But it’s important: at any
one time I’ll have a bunch of these matters on my desk, and
usually I’m fixing a bad situation.
The articles in
the series are:
I will focus on
closely held, small to mid-size businesses. This could be a
pre-IPO startup company or a family business, it doesn’t
matter. Further, I gear this series of articles to the
business owner. The employee is not my intended audience,
although these articles will be very useful to the employee
who might take the stock option.
There are two
general types of incentive plans available for you: cash
plans and equity plans. In cash plans, you give cash to the
employee. Usually you base the amount of cash given on the
company’s performance, as for example, phantom stock plans
and stock appreciation rights. If this is your preferred
topic, go to article #6 -
Cash Plans, Phantom Stock Plans and Stock
Appreciation Rights.
The second general
category of incentive plan is the equity plan, either stock
options or restricted stock. Equity means stock or
ownership, so with an equity plan you give ownership in the
company to the employees. I will talk about equity plans
first. Without further ado, please go to the next article
in the series,
Equity Plans – Stock Options and Restricted Stock for an
overview of equity plans.
Shameless Plug
You should hire a securities
attorney to help you with your employee incentive and stock
option plans. The job must be done right – the risks are
too high to do it wrong. If you want to read more try my
main page,
Securities Attorney. From there you can
link to other pages and articles of interest.
Call me to schedule a legal consultation:
510-796-9144 | 