A stock option plan is an option to give the key employees more incentive to stay with your company and potentially purchase your company. Usually the owner will sell to the employee (or employee group), 10%-25% in total. The amount of the stock will always be less than the majority of the stock.
The key person has a better chance of financing future stock purchases from financial institutions by owning this amount of stock in the company. This creates the building blocks of a future sale for the current owner.
This percentage of ownership doesn’t give the key employee control of votes during shareholder meetings. The majority owner can maintain control over the voting as long as the Articles of Incorporation and the Bylaws have been properly structured.
Another options is to issue only non-voting stock to the key employee(s) in Tier 1. By amending the corporations’s Articles of Incorporation, you can issues non-voting shares. You can even do this with S corporation. The one class rule of an S Corp does not apply as non voting stock is not considered a second class of stock for purposes of this rule.
CONTROL IN SELLING YOUR COMPANY
Usually corporate laws generally require at least two-thirds approval by the shareholders when the corporation has a major event as selling the company to a third party. As long as you maintain at least that amount of percentage ownership, will have the ability to control the decision regarding a future sale. Continue reading “Transferring Stock does not mean you have to give up control. “