North Carolina Phantom Stock Plan of Hercules, Inc.
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How to fill out Phantom Stock Plan Of Hercules, Inc.?
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FAQ
Phantom shares usually get liquid when the company gets acquired or goes public or if the company decides to do a buyback. Any gains from the assets must be reported to tax authorities as ordinary income upon vesting.
Summary. A phantom stock plan refers to a type of deferred employee compensation plan where plan participants benefit from the upside of a company's share price without actually receiving company shares. In a phantom stock plan, upon redemption of phantom stock, the plan participant receives cash compensation.
While not stock in the company, phantom stock is worth money just like real stock? its value rises and falls with the company's actual stock (or what the company is valued at, if it's not a publicly traded company). Employees are paid out profits at the end of a pre-determined length of time.
Finally, if an employee resigns or you need to terminate them, their phantom stock is discontinued, which leaves you without the risk exposure and gives you the chance to provide the phantom stock incentive to a future rock star hire.
Payments from phantom stock plans are subject to typical income taxes, not capital gains taxes. In turn, companies can deduct phantom plan payouts the year the employee reports the income. Employers must ensure their plans follow federal laws in section 409A of the Internal Revenue Code (IRC).
Since the benefits of phantom stocks can only be contingent upon the company's performance or predetermined benchmarks, employees with phantom stocks will not get the cash payout if the company does not meet the benchmark. Phantom stocks cannot be freely traded or transferred.
Expiration Date: The Expiration Date for each Phantom Share depends on whether it has vested. Where the Phantom Share has not vested pursuant to the Vesting Schedule below, the Expiration Date is the earlier of: (i) the Liquidity Event Deadline or (ii) the date of termination of Participant's Continuous Service.
The answer involves two variables: (a) the presumed value of the company, and (b) the number of shares to be used in the plan. Once these two answers are known, the phantom share price is calculated as the former (the value) divided by the latter (the number of shares).