Creatives & Equity Compensation

What Is Equity Compensation?

Simply put, equity compensation is when a company offers you shares or stock options as part of your employee benefits. These shares represent a percentage of ownership in the company. While your salary is the guaranteed money you’ll receive every paycheck, equity is a long-term investment. It could pay off big if the company does well—or it could amount to nothing if the company doesn’t succeed or never goes public. 

For many creatives, especially those who value autonomy and collaboration, the idea of having a stake in the company you’re helping to build can feel empowering. But, before jumping in, here are a few things to think about.

‍Understand the Equity Offer

Equity compensation packages can vary widely, so it’s essential to understand exactly what you’re being offered. Here are a few terms to familiarize yourself with:

Stock Options (ISOs/NSOs): 

• Options give you the right to buy shares at a set (often discounted) price. 
• Stock options are like having coupons that allow you to purchase company stock. It does NOT mean you own any stock (yet). You have to exercise the options in order to own any shares. 
• If you exercise options in a private company, you may never see a return on your investment. Only exercise if you feel confident in the company’s long-term success and/or you’re comfortable with the risks.
• ISOs can come with significant tax implications. They may potentially generate Alternative Minimum Tax, which often results in higher taxes owed. So proceed with caution and consult a tax pro before exercising, particularly if the company is private and you cannot sell the shares!

Restricted Stock Units (RSUs): 

• RSUs are shares that will be given to you outright, usually based on a vesting schedule. These schedules can be over multiple years, so make sure you understand how long you need to work at the company in order to receive the RSUs. 
• There are still tax implications for RSUs, as they increase your W2 income. Taxes on RSUs may be withheld at supplemental rates (often 22%) which may be higher or lower than your marginal tax bracket. This could result in taxes owed (or receiving a refund) upon filing your taxes. 
• Contrary to popular belief, holding RSUs beyond the vesting date provides no special benefit. At that point in time, it’s as if you simply purchased the shares like any non-employee could choose to do. 
• If you have RSUs in a private company, you typically can’t do anything with your shares until the company goes public or offers a buyback option. 

Employee Stock Purchase Plan (ESPP): 

• ESPPs allow you to purchase up to $25,000 worth of discounted company stock annually by deferring a portion of your paychecks. 
• The discounts are typically 10% to 15% of your lock-in price, and the discounted portion will be taxable income to you. 
• There may be restrictions on how frequently you can make changes to your ESPP deferrals, so don’t over-defer. 
• The lock-in periods are important to understand – if you locked in a lower purchase price, you may not want to adjust your ESPP elections until the lock-in has passed, or you could lose a significant discount. 

Consider the Potential of the Company 

Designers and creatives often play a huge role in shaping a startup’s brand and product. But not every startup succeeds. In fact, many don’t make it past the first few years. This is where the risk-reward balance comes in: equity could be worth a lot down the line, but there’s no guarantee. Ask yourself:

• Does the company have strong leadership?
• Are they solving a problem people care about?
• What’s the current financial health of the company?

If you have confidence in the answers to these questions, equity might be worth the gamble. But if you’re not sure the company will make it long-term, exercising options may not benefit you. 

‍Do you Align with the Company’s Mission? 

Another factor to consider regarding equity compensation is whether you believe in the company’s mission. You want to be invested (both literally and figuratively) in a company that aligns with your values. Does the company’s product or service excite you? Do you believe in its potential for growth? If the answer is “yes,” equity could be a great way to build wealth alongside your passion. 

Balancing Salary and Equity

Startups often offer two compensation packages: one with a higher salary and less equity, and one with a lower salary but more equity. If you’re considering equity, think about your financial situation. Can you afford to take a pay cut in exchange for shares? If not, don’t feel bad about prioritizing a higher salary. Your immediate financial stability is important. 

That said, if you can manage a lower salary and are passionate about the company, accepting more equity can potentially pay off in a big way. It’s all about finding a balance that feels right for you. However, if the company is private, it’s a significantly greater risk to accept a hybrid compensation plan. 

You Deserve a Seat at the Table

One of the most common challenges creatives face is being undervalued, especially in early-stage companies. But as a designer, your work shapes the company’s identity and product. Don’t hesitate to ask for equity compensation that reflects the impact you have on the business. You deserve to be seen as a key player—not just a designer who “makes things look pretty.”

If the company values your contributions and is genuinely invested in your growth, they should be willing to offer you a fair stake. Be sure to negotiate with confidence.

Think Long-Term

Equity is a long-term game. It might not feel immediately rewarding, especially if you’re used to the steady, predictable income of a salary. But the idea is that if the company grows, so does your equity. In a few years, those shares could be worth a significant amount—possibly more than you could ever make through salary alone.

That said, equity is also a bet on the future. If you’re comfortable with the risk, it could be a rewarding opportunity. But if stability is more important to you right now, a higher salary may offer more peace of mind.

Final Thoughts: Trust Your Gut

Equity compensation can be a powerful motivator, especially for creatives who thrive in environments where they feel truly invested in a company’s success. But it’s not a one-size-fits-all situation. Trust your instincts, and make sure any equity offer aligns with your financial needs and long-term goals.

At the end of the day, your contributions are valuable, whether they come with equity or a paycheck. So, go into the decision with confidence, and choose the path that feels right for you.

If you need a supportive conversation around navigating equity offers, we’re here to help you find clarity. Schedule a consultation today!