Compensating employees with equity has become the tech world’s go-to strategy for attracting talent and fostering loyalty, particularly for cash-strapped startups. It’s a powerful tool that can benefit both the company and employee. Yet equity-based compensation programs introduce significant complexities when it comes to taxes, accounting, legal, and personnel matters — often making things more complicated than early-stage founders are ready to face.
Below we’ll break down some of the most common advantages and disadvantages for equity-based compensation to help determine if it’s something your startup should consider. Note that the following primarily applies to privately-held companies.
