Startup's Need: Employee Stock Option Plan
By Advocate Atit Jain / 2016-10-15
An employee stock ownership plan (ESOP) is an employee-owner program that provides a company's workforce with an ownership interest in the company. In an ESOP, companies provide their employees with stock ownership, often at no upfront cost to the employees.

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Employee Stock Options (ESOPs) were never as famous as today, thanks to the start-up culture. Earlier ESOP were given only to the senior employees as a remuneration for their contributions to the company. But today, to attract and retain employees and key managerial persons’ start-ups are giving ESOPs at a very early stage in order to compensate for the low salary. ESOPs are an excellent tool for succession planning, both for liquidity and transition. In addition to various tax benefits, ESOPs also allow business owners to reward their employees and managers with a stake in the business.

Benefit for Employers

An employee stock ownership plan is a kind of benefit which is given to the employee by the employer company. It is an equity based deferred compensation plan. Under these plans, the employer gives certain stocks of the company to the employee for negligible or fewer costs which remain in the ESOP trust fund, until the options vests and the employee exercise them or the employee leaves/retires from the company or institution. Talk to the best startup lawyers in India to get your ESOP policy laid down.

Benefits of ESOP for Startup

The benefit for startup’s by giving ESOP’s is to retain employees as there is a lock in period for exercising the right to purchase the shares. Along with it, it also gives employees the feeling of ownership. They start feeling that they are not employees of the organisation but owners. Also, they get to share the profits of the company in the form of dividends and are motivated to work for the best of the company. It is also an Option in lieu of salary , start up's that needs funds and are not in a position to spend hefty amounts can offer this option to their employees in lieu of salary and motivate them to work for the betterment of the company. Top startup advocates in India can help you with your ESOPS.

An employee stock ownership plan (ESOP) is an employee-owner program that provides a company's workforce with an ownership interest in the company. In an ESOP, companies provide their employees with stock ownership, often at no upfront cost to the employees.

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Get connected to the Best Lawyers and Chartered Accountants Near You!


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