As an entrepreneur you start and manage your businesses, but as it grows you may require a partner to continue the growth or to introduce another dynamic to the business. The personnel market is becoming increasingly competitive with difficulties in finding the right talent and more importantly retaining them.
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Why an equity partner would suit me?
Many owner managed businesses build equity value over a period of time. The key employee you are trying to introduce and/or retain in your business would most likely to add to your business’s valuation over a period of time. Therefore, you would want to retain him/her for a period of time and compensate them for being your partner and for contributing to enhance your business’s value during such time. A share in equity gives such an employee a sense of ownership, therefore, it is becoming increasingly popular amongst owner managed businesses to dilute a part of their equity in favour of a key employee. Such employees may be new recruits or they have been with the business for a considerable time and are ready to step up to new roles.
Ways of introducing an equity partner
When you consider introducing an equity partner, you have a couple of options. You may want to issue shares to a key employee straight away. It may be a good option if the employee has been with the business for a period of time and you are comfortable with rewarding them in this manner.
Other alternative is to award them an option to subscribe for shares on happening of certain events. This can be linked to the ultimate sale of the business/company or performance of the employee or time. If your company is eligible to issue tax advantageous share options for employe