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Click ‘Get Form’ to open the phantom equity plan sample in the editor.
Begin by reviewing the introductory section, which outlines the purpose of the phantom equity plan. This will help you understand how it aligns with your business goals.
Next, navigate to the participant details section. Here, enter the names and roles of individuals eligible for phantom equity. Ensure accuracy as this information is crucial for future allocations.
Proceed to the valuation method section. Select or input the appropriate valuation approach that your organization uses. This may include market-based or income-based methods.
In the payout structure section, specify how and when participants will receive their payouts. Clearly outline any vesting schedules or performance metrics that apply.
Finally, review all entered information for completeness and accuracy before saving your changes. Utilize our platform’s features to sign and share the document securely.

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What is a phantom equity?

Phantom equity, also called phantom stock, is a type of employee compensation that provides cash payments tied to the companys value appreciation without granting ownership or voting rights.

Is phantom stock a good idea?

They provide incentives that go up as the value of the company does. This can help ensure employee retention, especially in times of internal volatility, such as an ownership change or a personal emergency. It reassures employees since phantom stock programs are generally backed in cash.

How to set up phantom equity?

Start your phantom stock plan in 3 steps Step 1: Develop a phantom stock plan. The Plan Rules will outline the terms and conditions of the plan, including eligibility, vesting schedules, payout calculations, and termination provisions. Step 2: Obtain a 409A. Step 3: Issue the phantom stock awards.

How to create a phantom stock plan?

How to Create a Phantom Shares Plan? Size of the plan (pool size): defining the % of shares that you want to allocate is critical. Vesting period: the period over which the shares will be vested. Vesting schedule: Simple structure is the most common (in case of 4 years of vesting, 25% of shares are vested each year).

Who typically receives phantom shares?

Phantom stock, also known as shadow stock, is a compensation plan that grants select employeestypically upper managementmany of the benefits of stock ownership without giving out real company stock.

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What is an example of a phantom equity plan?

Phantom Stock Plan Examples Heres what that could look like: An employee is awarded 100 phantom shares each valued at $15. The employee has an immediate unvested value of $1,500. The vesting schedule for this plan is 20% a year for five years, and the full amount will vest after five years.

What is an example of a phantom equity?

Consider this example: A startup valued at $10 million grants an employee 1% phantom equity that vests over four years. Baseline established: The company sets a $10 million starting valuation through a 409A appraisal. Grant issued: The employee receives phantom units worth 1% of the companys future value appreciation.

What is an example of phantom stock taxation?

For example, if a company is worth 1 million, and an employee is given 10% stock, that means the employee will be taxed as if they received $100,000 in cash (even though they didnt), giving them a likely tax burden of around $25,000 they have to pay to the IRS.

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