[Bleys]

Does anyone have any sample contracts where employees are paid with profit sharing or equity in the company?

What's the best way to go about this? Especially with equity. It seems dangerous to give equity up front, in case the employee stiffs you (don't work, or produces poor work)--they still walk away with part of the company. But it seems unfair to have any clause allowing the company to take back the equity if the employee is fired or dismissed for X reason. (I don't want to be open to any lawsuits where someone accuses me of firing them simply to get their equity back.) I suppose you could use equity as a bonus? After X weeks you get Z shares, after X months you get Z shares, after X years, etc. Or, after meeting milestone Y... But what's a good ceiling to impose?

Phew... ok, I asked a ton of questions.

Basically just looking for general advice or some templates/examples (that would be really great). I know I should ultimately talk to a lawyer, but I want to do some fact-finding first.

Thanks!

[mediad]

Most companies that do profit sharing or are "employee owned" have a probation period, usually around 6 months or so, before the employee is included in such plans, allowed to get insurance, allowed to start accumulating vacation and sick time, etc. After the probation period another interview is conducted where the employeer actually determines how the employee is working out and addresses any issues that need to be resolved if the employee is to continue working at the company and be included in investment plans, etc.

There is still the possibility of getting stiffed this way, but you should be able to weed out most of the bad people with the probation period.

G'luck!

D.

[evolvingentrepreneur]

I believe performance based equity is fairly common. If you find employees that are not ok with this, run, because they obviously are not intending on performing.