ESOP
What ESOP means, where you will meet it and what it means for your business.
DefinitionAn Employee Stock Option Plan (ESOP) gives employees the right to buy company shares at a fixed price after a vesting period, so they share in the value they help create.
Only companies can grant ESOPs, not LLPs. The company sets aside a pool, typically 5% to 15% of equity, adopts a scheme by special resolution, files MGT-14, and issues grant letters that state the number of options, exercise price, vesting schedule and exercise window. Options vest over time, commonly four years with a one-year cliff, and the employee buys the shares by paying the exercise price. You meet ESOPs when hiring senior people below market salary, in every funding round where investors expect a pool, and at exit when options are cashed out. What it means for you: tax is due on exercise as a salary perquisite on the difference between fair value and exercise price, deferred for eligible DPIIT startups, and again as capital gains on sale.
Where you will meet this term
- ESOP Planning & StructuringPrivate Limited Companies that want to hire with equity: pool sizing, a scheme the board can approve, the MGT-14 filing and grants that hold up at exit.from ₹39,999
- CFO ServicesFunded startups and growing companies that need a finance head for a few hours a week: runway, board packs, budgets and fundraise support, without a full-time hire.from ₹24,999/month
- Start-up India RegistrationFor a Pvt Ltd, LLP or registered partnership under 10 years old that wants DPIIT recognition and a shot at the 80-IAC tax holiday.from ₹4,999