Equity compensation is a strategic tool that allows companies to offer ownership in the business as part of employee compensation. For startups and scaling businesses, equity is often used to attract high-caliber talent, especially when offering competitive cash salaries isnโt feasible.
When structured correctly, equity compensation can help align employee motivation with the companyโs long-term success. However, choosing the right type of equity and understanding its implications is crucial to avoid legal, tax, and operational risks.
This guide explains the most common types of equity compensation, outlines how to design a plan, and shares best practices for managing equity as your company grows.
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