One popular way to do this is through the issuance of stock options. Offering equity to your employees can benefit your business in a number of ways.
But while the decision to issue stock options may be easy, determining how much to issue can be a much more complicated question. Why Issue Stock Options?
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Stock options are a great way for startups with limited capital to reward their loyal employees without having to lay out a lot of cash. In fact, they can help raise capital for the company when employees pay to exercise their options.
How Many Shares Should You Issue?
Stock options are also helpful in ensuring the quality of your workforce. Stock option plans can help attract and retain stellar employees, as well as motivate your current team to work even harder to make sure the business remains successful.
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The key to any stock option plan is maintaining flexibility in your ability to issue shares. Before you decide how many shares to issue to each employee, you first need to determine the maximum number of shares that can be issued overall.
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A stock option plan must set aside a specific number of shares. The size of this option pool will vary for each company.
Remember, the pool just represents how many shared can be issued. How many you ultimately issue is up to you.
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Many companies choose to designate a specific number of shares for a particular job position. While the option will be for a defined number of people options, the important thing to keep in mind is the percentage of the company that number represents. You likely want to offer a director a greater percentage of ownership than an entry-level employee.
Why Issue Stock Options?
Ultimately, this is a mathematical exercise that depends on how many employees your company has at each level. Companies often struggle with the question of stock options, and consider multiple plans before deciding on the one that people options best.
Consulting an advisor experienced with stock option plans can help take some guesswork out of the process.
Call us at or schedule a free strategy session today to see what The Gouchev Law Firm can do for your business.