Create Your Company's Equity Incentive Plan

Design an effective equity compensation program that helps you attract top talent, align employee interests with company goals, and conserve cash while building long-term value.

Equity Incentive Plan Template

An equity incentive plan is a formal program that allows companies to grant ownership interests to employees, directors, and key contributors through various forms of equity compensation. This comprehensive template will help you create a legally sound and attractive equity incentive plan that serves both your company's and employees' interests.

What This Template Is For

This template is designed for companies looking to establish a formal equity compensation program. It's particularly valuable for startups and growing companies that want to attract and retain talent while conserving cash. The template provides a framework for defining equity awards, vesting schedules, and administration procedures that comply with legal requirements and industry best practices.

When To Use This Template

Use this template when:

  • Establishing your company's first equity incentive program
  • Updating existing equity compensation plans
  • Preparing for fundraising or company growth
  • Creating competitive compensation packages
  • Aligning employee and company interests

How To Customize It

Follow these steps to customize your equity incentive plan:

  1. Define the size of your equity pool (typically 5-20% of fully diluted shares)
  2. Select the types of equity awards you'll offer (stock options, RSUs, etc.)
  3. Establish vesting schedules and terms
  4. Set exercise prices and fair market value determination methods
  5. Define eligibility criteria and allocation guidelines
  6. Include specific termination and change-of-control provisions

Common Use Cases

This template supports various equity compensation scenarios:

  • Startup employee compensation packages
  • Executive retention programs
  • Performance-based incentive structures
  • Advisory board compensation
  • Contractor equity arrangements

Best Practices

Follow these guidelines for an effective equity incentive plan:

  • Keep terms standard and straightforward
  • Ensure board approval for all grants
  • Maintain detailed documentation of grants and exercises
  • Include clear acceleration and termination provisions
  • Consult legal counsel for compliance review

Template Variations

Consider these variations based on your needs:

  • ISO-only plans for tax advantages
  • RSU-focused plans for later-stage companies
  • Performance-based equity plans
  • International equity plans for global teams

Success Stories

Companies have successfully used this template to:

  • Attract senior executives with competitive equity packages
  • Retain key employees through strategic vesting schedules
  • Align team incentives with company growth goals
  • Create transparent equity programs that scale

Frequently Asked Questions

What percentage of equity should we reserve for incentive plans?

Most companies reserve 5-20% of their fully diluted capitalization for equity incentive plans, with early-stage startups typically at the higher end of this range.

How do we determine vesting schedules?

Standard vesting is four years with a one-year cliff, followed by monthly vesting. However, you can customize this based on your company's needs and industry standards.

Should we include acceleration provisions?

Consider including double-trigger acceleration rather than single-trigger to maintain flexibility for future acquisitions while protecting employee interests.

What types of equity awards should we offer?

Start with simple stock options (ISOs and NSOs) for early-stage companies. Add RSUs and other instruments as your company matures.

How often should equity grants be reviewed?

Review your equity grant practices annually and whenever there are significant changes in company valuation or market conditions.