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term incentive plan (LTIP or LTI plan) is a deferred compensation strategy to attract, reward and motivate your employees, while also helping your company to retain valued talent and grow.
ESOPs are designed for prolonged, sustained growth by a business, and for a business that intends to operate for 10, 20, or more years into the future. An Equity Incentive Plan, in contrast, is geared more toward a change of control and exit from the business by service provider employees in 3-5 years (or less).
ESOPs are qualified retirement plans and they are designed to accumulate funds for retirement. While LTIPS and ESPPs could be used to accumulate savings for retirement, they are frequently used to accumulate savings for other financial goals, such as college tuition or a vacation home.
What Is a Long-Term Incentive Plan? A long-term incentive plan (LTIP) is a company policy that rewards employees for reaching specific goals that lead to increased shareholder value. In a typical LTIP, the employee, usually an executive, must fulfill various conditions or requirements.
An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit.
For example, the exercise price must be at least 110% of the fair market value price at the time the options are granted. However, the benefit of this type of plan is favorable tax treatment. The employee doesn't have to pay taxes on this grant until the date they actually decide to sell the stock.