Give employees equity - Beta Stock Market Accounting, May 24, 2010

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Last month I had to win over the positioning of your company and retain
top performers. One very effective way to do both, your key employees to
compensate with equity. The performance pay has been linked to a
critical factor for the best talent, with a sense of belonging and a
stake in the company’s future, and you have a powerful set of
incentives. This has equity. The basic theory of equity compensation is
simple: pay your generous people in the future with financial value,
they bear, and it is very expensive for them to leave. In this article
we will consider three ways to do this. Why pay for shares rather than
variable, such as bonuses or profit sharing? Bonuses and profit sharing
plans tend to reflect the performance of the last period, instead of the
current and future efforts, where you want to attract the attention of
your customers. They are set amounts, and to pay once, no amount of
creativity, imagination and diligence they can be greater. The bonus and
incentive payments are usually on time, which are quickly forgotten in
the atmosphere, what you have done-for-me-time d’aujourd’hui. Finally,
the cash bonuses – and profit-sharing demands profits. rarely in a
growing company, either (or both) can from them. Equity to close these
gaps. Equity is the bonus that keeps on giving. The value of share-based
compensation is expected to increase over time, often considerably.
Acknowledges the contribution of equity capital rose from your
employees, but to do the real reward for the work still is – have your
people to stay around to reap the fruits. In real terms, the current
cost of equity compensation is reasonable, especially compared to the
loyalty it can buy. In addition, as the money not pass into other hands,
if the equity premium, you can use it as a reward, even if your company
is short of money. There are other features to equity. Especially if
your company is likely to go public or be acquired equity on the best
talent between your small business and jobs to choose from more
prosperous public enterprises. In addition, stresses equity and stressed
the common interests between the owners of your company and the
“rank-and-file, with the best performers to the business belongs.
GrantsOutright grant Winner Stock shares are easy to implement. Your
company, because a key employee a certain number of shares, the value of
the company by the number of shares outstanding. That is all. More than
any other form, are tangible measures. Stock to make your key people
feel like owners, and if people really see themselves as shareholders
wanted leave only rarely. But there are also disadvantages. The first is
the lack of a deadline acquisition – the property at the time of grant
of shares – which means that if someone has a better offer, they can
leave and take it with them instead of through . It also leads to the
second problem: the value of the stock as ordinary income of the
employee during the current year taxable – what issue to a double strike
– no extra money and start to tax. stock grants can also concentrate
your control and the power of decision. Critical Success Tip is to use
as a vehicle attachment of staff, require a holding period of shares
before it can be sold. Remember to keep the right of first refusal on
the sale – you do not want to get these measures into enemy hands. In
addition, the shareholders’ shares for sale in the event of termination.
(Offer requiring – not to buy your company.) Finally, if you do not
want the power of decision, two classes of shares: Creating voting and
non-voting share. Non-qualified stock OptionsNon qualified stock options
a powerful and effective way to keep your employees. A The option
holder has the right to acquire shares of the Company at a price
subsidy, which is usually the value of outstanding shares purchased. If
your business grows, the value, the value the option increases. Options
are often a waiting period before they be able to “exercise” is that to
stay the staff and continue to contribute to society. A benefit for the
employees of the tax deferral feature: there is no tax due until the
option is exercised. Above all, the options are not entitled to vote
themselves. can TipSince Critical Success Using non-qualified options on
a fully discretionary, have reward schemes for individuals, teams and
companies. In addition, to determine the retention period to a
stair-shaped base – for to produce example, a jacket over 50% two years,
second 50% in two years, exercisable. This type of structure allows
your employees the “choice” to leave and remain rather to a significant
carrot. Stock Phantom Phantom floor is a fiction, that people can
participate in value accounting to the top of the company. Unlike “real”
Ghost broth confers no property right to real business. A stock is a
phantom credited to the account of an employee an amount equal to the
value of the “real you company” shares. Over time, the account is with
the changes in the value of shares and dividends and other distributions
credited. There is no taxable income for the shareholders ghost until
they “bought” by the workers. There are two types of plans , phantom
stock, “growth” and “basic.” Under the Growth Plan, for redemption, the
employees will receive an amount for the revaluation of the portfolio.
Under a “basic plan”, the employees receive the full amount of the
assessment, plus the value of the shares. TipPhantom Critical Success
hand the vehicle of choice in equity, if you do not want the ownership
or control, or if you are not a Subchapter S and can be diluted more
than the maximum of thirty-five shareholders. Ask a vesting period of
virtual shares : Shares are granted, but require a minimum period of
detention. If the employee leaves before the detention period has
expired, or he loses the value of the shares. You can also create a
repayment, after which you can redeem the spirit of money. In other
words, do not your people cash in. ValuationFor leave share value of
public enterprises established on the market. Private companies need a
kind of evaluation that is outside the scope of this article agree – but
some rules “success” is. 1) To assess periodically published intervals –
at least once a year. 2) Document your evaluation process, so
understand that your shareholders can. 3) Construction of a liquidity
reserve for the redemption of shares enable and make Him known. After
these three rules to feelings of your employees, their shares (and
options) have a real value, and they want to stay and continue to
participate on the rise increase.