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Rarely do employees get equity

Q. I have been a general manager for the past few years at a company that is growing rapidly. How do I go about asking for equity in the company and what are the options when it comes to buying into a private company?

The other managers have been with the company longer, and are more experienced. But I am in line to take the company to a new city to head up operations there. Can you offer any advice?

Providing to employees is not common in privately held enterprises in Australia. The reasons for this are twofold.

The first relates to the taxation implications of issuing equity to employees where the value provided is effectively taxed as income. There are also fringe benefits tax implications of providing loans to employees to enable them to buy equity. But there may be ways to mitigate the worst of these hurdles, but specific advice would be needed.

Second, typically in family businesses the involvement of external parties is not widely accepted because of issues surrounding accountability, family succession etc. Where the business is not family- owned, there are probably greater opportunities.

In terms of approaching this issue, I would be inclined to bring the matter up with your employers sooner rather than wait until you have successfully established the interstate branch. Clearly, this needs to be done sensitively and respectfully. The approach should be to understand the circumstances of the ownership of the business and to find out if it was a possibility on the basis that you did succeed. The response may be an outright "no", in which case you can look elsewhere.

If the response is more favourable, you then have something to work with and a pathway to achieving your goal could then be negotiated.

Ian Stewart is a partner at Pitcher Partners accountants, auditors, advisers.

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