New Article Looks at Five Common Errors in Equity Plan Design in Closely Held Companies

In Five Key Errors in Designing Equity Compensation Plans in Closely Held Companies, I explore some common errors closely held companies make in designing equity plans. Based on conversations with companies considering setting up plans, here are five typical ideas leaders have:

1. I'm planning to give out 10% of the equity or rights to the equity.
2. I'm planning to give most or all of whatever percentage I've decided to give up front to those eligible.
3. Employees will only be able to exercise their awards when the company sells or goes public.
4. Only key employees will get equity.
5. I will base the amount each person gets on a percentage of the company that I have heard or read makes sense.

In some cases, one or more of these ideas makes sense. But more often than not, they don't. Read the article to see why and what you can do about it.