Previous Section
Introduction

Roadmap8 minutes, 2 links

The Holloway Reader

The Holloway Reader you’re using now is designed to help you find and navigate the material you need. Use the search box. It will reveal definitions, section-by-section results, and content contained in the hundreds of resources we’ve linked to throughout the Guide. Think of it as a mini library of the best content on equity compensation. We also provide mouseover (or short tap on mobile) for definitions of terms, related section suggestions, and external links while you read.

How this Guide is organized

This Guide contains a lot of material. And it’s dense. Some readers may wish to read front to back, but you can also search or navigate directly to parts that are of interest to you, referring back to foundational topics as needed.

Equity compensation lies at the intersection of corporate law, taxation, and employee compensation, and so requires some basic understanding of all three. You might think compensation and taxation are separate topics, but they are so intertwined it would be misleading to explain one without the other. We cover material in logical order, so that if you do read the earlier sections first, later sections on the interactions of tax and compensation will be clearer.

We start with Equity Compensation Basics: What compensation and equity are, and why equity is used as compensation.

But before we get much further, we need to talk about what stock is, and how companies are formed. Fundamentals of Stock Corporations covers how companies organize their ownership, how stock is issued, public companies and private companies, and IPOs and liquidity (which determine when equity is worth cash).

While not everyone reading this works at an early stage company, those who do can benefit from understanding the role of equity in Startups and Growth. This is good context for anyone involved in a private company that has taken on venture capital.

How Equity is Granted is the core of this Guide. We describe the forms in which equity is most commonly granted, including restricted stock grants, stock options, and RSUs.

Now is where it gets messier—taxes:

After these technical concerns, we move on to how you can think about all this in practice. These sections focus on scenarios common to employees and candidates, but are also of likely interest to founders and hiring managers:

  • Plans and Scenarios: Whether you have equity now or will in the future, it is helpful to learn how to think about the value of equity and its tax burden. We also cover whether you can sell private stock.
  • Offers and Negotiations: Equity often comes up as you’re negotiating or debating whether to accept a job offer. Here we cover what to expect, what to ask, tips and pitfalls, and more.

Finally, we offer some additional resources:

  • Documents and Agreements: A bit more detail on the actual legal paperwork you’re likely to see as you negotiate and after you’ve accepted an offer.
  • Further Reading: A curated list of what else you can read on the subject, including many papers, books, and articles that have informed this Guide.

···

When to turn elsewhere

CEOs, CFOs, COOs, or anyone who runs a company or team of significant size should be sure to talk to an equity compensation consultant or a specialist at a law firm to learn about equity compensation plans.

Founders looking for an introduction to the legalities of running a company may wish to check out Legal Concepts for Founders, from Clerky, in addition to talking to a lawyer. Founders should also lean on their investors for advice, as they may have additional experience.

Executive compensation at large or public companies is an even more nuanced topic, on both sides of the table. Hire an experienced lawyer or compensation consultant. There are extensive legal resources available on executive compensation.

Seeking professional advice

This Guide does not replace professional advice.

Please read the full disclaimer and seek professional advice from a lawyer, tax professional, or other compensation expert before making significant decisions.

Does that make reading through these details a waste of time? Not at all. Important decisions rarely should or can be blindly delegated. This Guide complements but does not replace the advice you get from professionals. Working with the support of a professional can help you make better decisions when you have an understanding of the topic yourself and know what questions to ask.

Related sections
You’re reading an excerpt from a Holloway Guide.
The Holloway Guide to Equity Compensation
Joshua Levy, Joe Wallin, and over 35 contributors
Over 3 hours and 300 linked resources
Stock options, RSUs, job offers, and taxes—a detailed reference, including hundreds of resources, explained from the ground up and made to be improved over time.