No discussion about compensation in ESOP companies is complete without the topic that often provokes the most interest and yet is often the least understood: the long-term incentive plan (LTIP). This is especially true for S corporation ESOP companies, where additional complexities and considerations come into play. This article seeks to shed light on this topic by spotlighting the unique issues faced by S corporation ESOP companies in designing, implementing, and administering LTIPs.

This article covers important LTIP planning issues (such as eligibility, taxation, and accounting) but does not attempt to cover each issue in great detail unless it is particularly germane to an S corporation ESOP company. This higher-level discussion helps to keep the focus on the unique intersection of LTIPs and S corporation ESOP companies…