An Equity Incentive Plan is an arrangement under which equity compensation is provided to one of your startup’s employees or consultants for services rendered, a way of helping to preserve what are likely to be (as is the case with most startups) limited cash resources. Instead of cash, under the Equity Incentive Plan the employee or consultant receives non-cash compensation such as shares of Common Stock or stock options. This can be of benefit to your startup in ways besides cash preservation. For instance, an individual who owns Common Stock in your startup will probably be better motivated to help it succeed. Shares of Common Stock and stock options can also provide an incentive for individuals to remain with your startup should times become difficult. The Equity Incentive Plan can be attractive (or at least acceptable) to your critical employees and consultants because they receive compensation for services rendered that will have a greater future value than the cash they would have received today (immediately).
The Equity Incentive Plan generated by SmackDocs allows for the issuance of both stock options and Restricted Stock Awards.