Equity Comp type and terms for Advisors and Key Employees?

January 29, 2025

by a searcher from SDA Bocconi - School of Management in Fort Lauderdale, FL, USA

Has anyone given equity to key employees/advisors in an acquisition/expansion?
Was it Restricted Stock or Options? or something else

Is the only real difference the tax implications in RS vs Options?

(using C Corp)

Vesting schedules similar to startup or shorter?
anyone use creative Time + Performance (hybrid) based vesting structures?

Anyone know of good books on this topic? (creative equity comp)

A retired director from my target is advising me closely and has been invaluable to me. The target is a spinoff of a public company and some advisors are in Europe and abroad.

Thanks!

Reply by a professional
from Dartmouth College in Los Angeles, CA, USA

Restricted stock usually best at very very early stages (e.g. founder issuances) since the recipient has to pay for the shares, so if the company has any value it can require a substantial cash payment, which isn't ideal for most recipients. With options they can wait and see if exercising makes sense, though this can sometimes result in high tax bills at the time of exercise. There are also differences from a tax perspective in terms of timing of when tax is owed (talk to a tax lawyer for specifics). Also potential QSBS benefits for RS. There are other technical differences but concept is the same. Granting options with an early exercise option gets you to basically the same place as RS while preserving flexibility for the recipient. If the company is very mature, typically only public companies, you would consider using RSU's.

Reply by a searcher
in West Palm Beach, FL, USA

Hi Phillip, this might be the best $8 you ever spend... Founder’s Pocket Guide: Stock Options and Equity Compensation https://a.co/d/9pEsFNP

+4 more replies.

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