A closely-held business will often use deferred compensation arrangements to induce or reward certain behavior by its key non-shareholder executives; for example, to incentivize the executive to attain certain business performance goals or operational benchmarks.

Such an incentive arrangement will defer the payment of compensation such as a bonus until the compensation is earned, usually

Nonqualified Deferred Compensation

In general, a nonqualified deferred compensation plan allows an executive to defer the “receipt” and income taxation of a portion of his compensation to a tax period after the period in which the compensation is earned (i.e., the time when the services giving rise to the compensation are performed). 

The payment of

Once Upon A Time . . . 

a corporation, Corp, was founded.  The year was 2006, and Employee immediately was hired as Corp’s chief technology officer and received restricted stock grants from Corp. As a “founder” of Corp, Employee initially owned 9.8% of Corp’s stock. However, each time investors infused capital into Corp, Employee’s interest

“Call it what you want, incentives are what get people to work harder.”  — Nikita Kruschev

Most of our clients are closely held, often family-owned businesses.  The current owners may be the founders of the business, or they may be a generation or two removed.  Sometimes, the owners have children who are active in