Frequently Asked Questions

What types of equity awards should I grant?

Initial equity grants will generally be of shares of restricted common stock because the company valuation at/near formation is usually very low, allowing for stock acquisition by grant recipients at relatively low cost (more information about restricted stock can be found here). Once a company’s common stock no longer has a nominal value, it may make sense to start granting stock options instead of restricted stock. A company should not grant stock options until it has received a 409A valuation because stock options must be granted with an exercise price equal to, at least, 100% of the fair market value of the stock on the date of the grant and a company’s board of directors can, in most cases, depend on a 409A valuation to determine the fair market value of their company’s common stock.