Profit Sharing Plans & Phantom Stock Plans Explained

Incentive Mechanisms that do not Transfer Stock Ownership.

Sharing ownership of a small company with the employees can create numerous conflicts. It is often wise to look to other incentive mechanisms that reward employees for increasing company profit without sharing ownership. Two such alternatives are profit sharing plans and phantom stock plans.

Profit Sharing Plan.

A profit sharing plan is one that provides annual employer contributions (which may be zero), and allocation to employee