By: Michael L. Hund and Salvatore J. Bauccio
Introduction There comes a point in the life cycle of many businesses when its employees desire equity in consideration of their services to the business-the employees want to become owners and not just work for the business and its owners. Wanting to align the interests of the employees with those of the business, the business owners may be receptive. What the business owners do not want, however, is to give up control of the business or adopt a system that is burdened with legal and tax complexities. This article will discuss the factors that businesses, particularly those that are closely held, should consider when developing an equity incentive plan while giving a basic explanation of the key legal and tax concepts involved.
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