Founder guide · US-focused education
Equity Grants: Dos and Don'ts Before You Promise Anyone a Percentage
By RaisePlan · Updated
Educational information, not legal, tax, accounting or investment advice. US scope; rules and signed documents vary. Cited benchmarks are static reports, not allocation targets. Worked examples are synthetic, not market data.
Equity grants are often a founder's first real cap table decision. This guide covers common US practice for private corporations (often Delaware). Rules differ by country, state, and company documents, and none of this replaces advice from qualified legal and tax counsel.
Do: Know which denominator you mean
"1% of the company" can mean different things. Issued and outstanding counts only shares that exist today. Fully diluted usually also counts options, warrants, the unallocated pool, and sometimes convertible instruments such as SAFEs or notes. Exactly what is included depends on the company's documents and the contract you are reading.
Synthetic example (made up for illustration): a company has 8,000,000 shares outstanding and a 1,000,000-share option pool. It grants 50,000 options from that existing pool, so the 50,000 is part of the 1,000,000, not added on top. Measured against 9,000,000 (8M shares plus the pool, with nothing else assumed outstanding), the grant is about 0.556% fully diluted. Measured against outstanding shares only, it is 0.625%. These are percentages of share-equivalents, not current stock ownership: an option is a right to buy stock, not stock. Write grants as a number of shares and always state the denominator.
Do: Separate the reserved pool from what has been granted
A reserved pool is shares the board has set aside for future grants. Granted options have been given to someone. Exercised options have become actual stock. Track each separately so you know how much pool is actually left.
Don't: Promise equity informally
A message like "you'll get 2%" can lead to a dispute. In a US corporation, stock and options are generally issued only with board approval. Delaware's rules on rights and options to buy stock are in 8 Del. C. § 157. Get board approval and signed grant documents before treating a grant as final.
Do: Use vesting, and write down its terms
Vesting means the equity is earned over time, often with a "cliff" before the first portion vests. The schedule, what happens if someone leaves, and any acceleration should all be in the signed documents.
Do: Know when an 83(b) election can come up, and ask tax counsel
- An 83(b) election generally matters when someone receives stock that is still subject to vesting. Common cases are founders' restricted stock and stock bought by early-exercising options where the plan allows it. IRS Form 15620 instructions say the election "must be filed no later than 30 days after the date the property was transferred." If that day falls on a weekend or legal holiday, IRC § 7503 can push the deadline back.
- A typical private-company stock option that hasn't been exercised is generally not stock yet, so the 83(b) question usually comes up at exercise. There are exceptions and edge cases, so check your specific grant with tax counsel.
Don't: Skip valuation and tax questions
US tax treatment depends on the option type, ISO or NSO (IRS Tax Topic 427), and on how the strike price is set. Before you grant, ask counsel whether you need an independent valuation, often called a 409A valuation, and how to set the strike price.
Benchmark box (context, not a target)
Carta's Founder Ownership Report 2026 (first published Mar 12, 2026; page updated Oct 27, 2026) reports that the median founding team holds about 56% of fully diluted equity after seed and 36% after Series A. That is based on Carta data on rounds raised from 2021 through 2025. These figures cover only companies on Carta's platform and vary by sector. This is a static report, not live data. Carta's employee-pool medians aren't quoted here because the public summary doesn't say exactly what the pool figure includes. Size a pool from your own hiring plan, with counsel.
To see how a priced round and option pool top-up could change a sample cap table, try the RaisePlan priced-round dilution demo. It models round dilution only, not individual hiring grants.