Salt Lake Utah Proposed book value phantom stock plan with appendices for First Florida Bank, Inc.
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How to fill out Proposed Book Value Phantom Stock Plan With Appendices For First Florida Bank, Inc.?
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FAQ
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).
Phantom stock can, but usually does not, pay dividends. When the grant is initially made, there is no tax impact. When the payout is made, however, it is taxed as ordinary income to the grantee and is deductible to the employer.
A phantom stock plan is an employee benefit plan that gives selected employees (senior management) many of the benefits of stock ownership without actually giving them any company stock. This type of plan is sometimes referred to as shadow stock. Rather than getting physical stock, the employee receives mock stock.
The phantom stock becomes a liability that the company must eventually convert to either cash or company stock. In privately held businesses, company stock is rarely an option. employees like these plans as any phantom stock they receive is not taxable until converted into cash by the company.
Since phantom shares are not the same as real stock, you don't have to worry about employees voting down key decisions, such as selling the company.
Phantom stock plans do not result in shareholder dilution because actual shares are not being transferred. Employees do not become owners. Instead, they are potential cash beneficiaries in the underlying company value.
A phantom stock plan is a deferred compensation plan that awards the employee a unit measured by the value of a share of a company's common stock, or, in the case of a limited liability company, by the value of an LLC unit. However, unlike actual stock, the award does not confer equity ownership in the company.
Phantom stock is not a good idea if the company is planning on issuing them to most or all employees, especially if the shares will be paid out when the employee leaves the company or retires. In that case, phantom shares may be ruled illegal because of the Employee Retirement Income and Security Act (ERISA).
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).
Phantom stock plans can be a valuable method for companies that seek to tie incentive compensation to increases or decreases in company value without awarding actual shares of company stock.
