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Compare Equity Instruments for European Startups
Founders and employees often need to choose between different ways of granting equity, each with different tax timing, cash cost and paperwork. These comparisons set out the mechanics of each instrument side by side so you can see the trade offs before deciding what fits your company and country.
Instrument comparisons for grant decisions
Stock Options vs Shares
Stock options give the right to buy shares later at a fixed price, while direct share grants hand over ownership immediately. The right choice depends on how much cash the recipient has, how the company is taxed locally, and how much admin the founders can take on.
Stock Options vs RSUs
Restricted stock units, or RSUs, are a promise to deliver shares once vesting conditions are met, with no purchase price involved. Stock options require the holder to pay a strike price to receive shares. The two instruments behave very differently on tax timing and perceived value.
Stock Options vs Phantom Shares
Stock options lead to real share ownership if exercised. Phantom shares are a cash bonus plan that mirrors share value but never issues actual shares. The choice affects the cap table, tax treatment and how much control the company keeps.
Phantom Shares vs Shares
Phantom shares replicate the economic value of shares without granting ownership, while real shares confer legal and voting rights immediately. Companies choose phantom shares mainly to avoid dilution and keep control concentrated.
Growth Shares vs Stock Options
Growth shares are a special class of share bought upfront at a low value tied to a hurdle, giving immediate ownership. Stock options give the right to buy ordinary shares later. Both aim to reduce tax, but they work in different ways.
RSUs vs Shares
RSUs delay share delivery until vesting, avoiding a purchase step but creating a tax event later. Direct share grants create ownership straight away, which can mean an earlier and sometimes smaller tax bill depending on the value at grant.
Equity vs Salary
Equity conserves cash but carries risk and uncertain value, while salary is certain and taxed as ordinary income immediately. Most startups use a mix, weighted towards equity when cash is limited and towards salary as the company matures.
Equity vs Bonus
A cash bonus is a one off payment recognising past performance, taxed immediately as income. An equity grant is forward looking, meant to keep the recipient invested in future growth, with value that depends on the company's future success.
For deeper background, visit the stock option, tax and tools hubs
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