July 15, 2025 by investor
In a startup, it’s helpful to compensate employees with company stock.
Most companies use stock options.
Rule 701 gives the startup the ability to issue equity to its employees.
This works even if they are not accredited investors.
The limit is $10M or 15% of the outstanding shares in a 12-month period.
Once you set the 12-month period, it must remain fixed.
Rule 701 provides an alternative to the traditional stock option plan.
It’s more flexible than an options plan and can be used to create more specific compensation plans.
Founders often align the 701 disclosure with the fiscal year of the company.
The shares are restricted stock, which means they must be registered with the SEC before one can trade them.
Consider Rule 701 for your stock compensation plan.
Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.
Let’s go startup something today.
________________________________________________________________________
Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
For more episodes from Investor Connect, please visit the site at: http://investorconnect.org
Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/
For Feedback please contact info@tencapital.group
Please follow, share, and leave a review.
Music courtesy of Bensound.
Copyright (c) 2025, Hall Martin and investorconnect.org. All rights reserved.
Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.
