In order to retain good employees, some companies opt to grant employees options or restricted stock. The purpose behind this decision is simple: the business needs motivated and invested employees who will work their hardest to ensure that the business grows and prospers for years to come. Options and restricted stock/units are a financial incentive for employees to work hard and stay with the company.

Option plans govern how the options/restricted stock program functions, detailing how many option shares are available under the plan, the rights and obligations that each option holder has, and restrictions on transfers in the event that an employee leaves the company or dies. These plans can be complicated and provide for many different contingencies. When a company grants an employee stock options or restricted stock, the employee enters into an option or grant agreement and agrees to be bound by the terms of the overarching plan. The company then appoints an administrator to oversee the program and grant options or restricted stock to employees.

While stock options and restricted stock are traditionally associated with corporations (corporations issue stock after all), plans can be put in place for employees of limited liability companies as well. These plans are known as stock unit or restricted unit plans because LLCs issue units, not stock, although units are essentially the same thing.

If your company would like to offer employees incentives via stock/unit options, please feel free to contact The Taormina Firm.