Equity Compensation Plan Design for Private Companies

Summary

This practice note discusses the design of equity compensation plans for private companies. Privately held companies often like to incentivize their executives and other key employees through equity compensation grants to better align their interests with those of the company's equity holders. In many respects, equity compensation plans for privately held companies resemble those of public companies. However, a number of significant differences exist due primarily to the illiquidity of the stock, including a new opportunity to allow certain equity grantees to defer taxation for up to five years under I.R.C. § 83(i) pursuant to 2017 tax reform legislation.