How to Give Equity in Your Business: A Guide for Founders and Owners

If you're a founder or business owner considering giving equity to employees, co-founders, or advisors, you're not alone—and asking the right questions is vital. This is one of the most consequential and irreversible decisions you'll ever make for your company. It's also one of the most misunderstood.

6/24/20255 min read

At High Score Strategies, we get this question all the time—from companies looking to retain key people, attract talent, or start succession planning. But despite its importance, the process is murky. There’s no universal playbook. So this guide is meant to help you cut through the complexity with clarity, structure, and a practical path forward.

Why Equity Is So Powerful—and So Risky

Granting equity means giving up a piece of your company in exchange for something: loyalty, effort, expertise, or capital. But make no mistake—this is a multimillion-dollar decision. Done right, it can build tremendous value. Done wrong, it can damage your company and your personal wealth.

Equity impacts multiple aspects of your business. It’s not just about financial ownership—it’s also about governance, risk, incentives, and culture. When someone becomes a shareholder, they’re no longer just an employee or advisor. They’re a co-owner. That creates legal rights, reporting obligations, and often a long-term relationship that can not easily be unwound.

The key is intentionality. If you treat equity like a handshake deal or a quick fix for employee retention, it can backfire. But if you use it strategically, it can align your team and accelerate your company’s growth.

Common Triggers for Equity Conversations

Most equity conversations start with a problem or fear:

“I’m afraid I’ll lose a key employee if I don’t offer them a stake.”
“I want to bring in a co-founder but don’t know how much to give.”
“I’m not sure how to retain people without burning cash.”
“What if I give away too much and lose control?”

These are all valid concerns. Equity feels big because it is big. It’s your ownership—and your future. If you’re asking these questions, you’re in the right mindset. Now it’s time to layer in clarity and structure.

When Should You Offer Equity?

There are three primary reasons to consider granting equity:

Reduce Risk – Equity can help you retain critical talent or lock in succession plans. If losing someone would materially damage the business, making them an equity partner might make sense. Equity also builds buy-in—people with skin in the game tend to act differently.
Accelerate Growth – Sometimes you need to attract someone who can unlock sales, access funding, develop IP, or expand your reach. If someone materially shifts your growth trajectory, equity may be a fair exchange.
Contribute Assets – Founders often get equity because they bring something valuable: technology, intellectual property, deep relationships, or capital. That logic also applies to early hires, strategic advisors, or joint venture partners who bring something tangible to the table.

Keep in mind: not everyone who’s excellent at their job is an equity candidate. Being indispensable is not the same as being irreplaceable.

Equity should be offered to those who fundamentally change the value equation of your business.

Choosing the Right Form of Equity

Equity comes in many flavors—and choosing the wrong one can create confusion, unintended taxes, or unnecessary friction. Here are the most common structures:

Stock Grants – A direct transfer of shares. Easy to understand, but creates a permanent ownership stake.
Stock Options (ISOs/NSOs) – Gives the holder the right to buy shares later at a set price. Often tax-advantaged and flexible.
Restricted Stock – Shares that are subject to time- or performance-based vesting. Real equity, but with guardrails.
Phantom Stock / Stock Appreciation Rights (SARs) – Not true equity, but mimics the financial upside. No voting rights, but fewer legal entanglements.
ESOPs (Employee Stock Ownership Plans) – Highly structured plans that let employees earn shares over time, typically as part of retirement plans. Great for legacy-minded exits, but administratively heavy.

Each structure has pros and cons. Choose based on your goals, your company’s stage, and how long you want the relationship to last.

How Much Equity Should You Give?

This is the question that keeps founders up at night. Give too much, and you may regret it. Give too little, and you may fail to attract or retain the person you need. There’s no perfect formula, but here are some benchmarks that can help:

Advisors – 0.1% to 1%
Board Members – 0.25% to 2%
First 5 Employees – 0.5% to 2% each
Key Hires / C-Level Executives – 1% to 5%
Co-founders – Typically 20% to 50%, depending on timing and contributions

That said, equity isn’t just about roles—it’s about value exchange. What value is the recipient bringing? Are they helping you scale? Reducing your risk? Contributing critical IP or funding? If the answer is yes, equity might be on the table.

Make no mistake: equity is a currency. It should never be given lightly—and never without a clear reason and structure.

Building a Strong Equity Plan

A good equity plan is more than a cap table—it’s a strategic asset. Your plan should:

Be purpose-driven – Know your “why” before you make any offers
Be clear and specific – Who gets equity, how much, and under what conditions?
Include vesting terms – Ideally based on time and performance
Anticipate buyback clauses – What happens if someone leaves?
Align with financial planning – Consider valuation, dilution, and future fundraising

One of the most overlooked elements? Vesting structure. Time-based vesting is common (e.g., four years with a one-year cliff), but performance-based vesting is often more powerful. It ensures equity is earned, not just accrued.

Also: think about accelerated vesting in the event of a sale. It helps keep incentives aligned if the company exits earlier than expected.

Legal and Tax Considerations

Equity comes with strings. In many jurisdictions, once someone owns equity, they gain legal rights as shareholders—even minority ones. That affects how you govern, report, and make decisions. Depending on the structure, you’ll also have tax implications: for the company, the recipient, or both.

Make sure your legal documents are airtight. You’ll need:

An up-to-date cap table
A shareholder agreement (or LLC operating agreement)
Clearly defined vesting and repurchase terms
Tax counsel familiar with equity structuring

This is not the place to cut corners. Invest in good advisors.

Equity Alone Doesn’t Guarantee Loyalty

Here’s the surprise for many founders: equity isn’t as “sticky” as you think. Data shows that granting equity reduces employee turnover by only about 20%. Most equity recipients still leave within four years—and many never exercise their options.

Why? Because equity isn’t enough. People stay for leadership, mission, growth opportunities, and culture. Use equity as one tool in your retention toolkit—but don’t rely on it alone.

Final Thoughts

If you’re nervous about offering equity, you should be. It’s a permanent decision with long-term implications. But it can also be a game-changer when deployed wisely.

A thoughtful equity plan can:

Attract and retain high-impact people
Create long-term alignment with your team
Incentivize growth and value creation
Set up a smoother exit or succession path

Just remember: equity is not a gift. It’s a business decision—one that reflects the value someone adds to your company’s journey.

If you’re ready to structure equity with confidence, talk to someone who’s been there. At High Score Strategies, we help founders and owners make these decisions with clarity, data, and long-term strategy in mind.

Equity is about partnership and wealth building. Make sure the people you bring in are worth sharing the journey—and the reward.

How To Give Equity (and How Much) In Your Business - Masterclass

Watch our masterclass on granting equity. Please contact us if we can help you win in your equity allocation.