Flexibility is important – for employer and employee. As a startup company, you might want to get creative in finding ways to compensate your employees.
One way for cash-strapped owners of young businesses to handle lean times is to get employees to agree to deferred compensation. It could be in the form of back pay once the business reaches a profit. A key advantage of deferred compensation plans is the opportunity for employees to defer some taxes on current income. This can be a major plus for highly compensated executives.
Stock options can be an important tool to help retain, attract, and motivate employees. Incentive stock options give special tax benefits to employees. Shares must be held for at least one year and can only be sold or given away after two years. Stock option plans must be well documented and checked to ensure everything is done legally.