What are advisory shares? A guide for founders

Behind most great companies, whether a new startup or a multinational giant, is a secret (OK, semi-secret) weapon: industry veterans with years of real-world experience and volumes of wisdom to share. Instead of bringing them on as full-time hires, many businesses turn to advisory shares—a flexible way to tap into their expertise, especially when budgets are tight.

In this guide, we’ll explain what advisory shares are, how they differ from regular equity, and why they’re key to scaling a successful business.

What are advisory shares?

Advisory shares are a form of equity compensation that startups grant to experienced professionals—advisors—who provide strategic guidance and industry expertise. These advisors often open doors to potential investors, partners, or other important social connections that can help the company grow.

Early-stage startups often have limited access to cash. So, instead, they use advisory shares. For example, a startup might offer 0.5% equity to a former executive who helps shape the fundraising strategy and introduces the company to potential investors. Instead of receiving all the shares at once, the advisor might earn them gradually over two years—a process known as a vesting schedule (more on that below).

Advisory shares vs. equity shares vs. regular shares

Advisory shares, equity shares, and regular shares all represent ownership in a company, but the roles they serve and the rights that come with them can differ significantly.

Advisory shares

Companies often reserve these for experienced professionals who bring valuable insights and seasoned knowledge to the table. They’re usually for part-time advisors who aren’t involved in day-to-day operations but help the company grow in other meaningful ways. 

Unlike some other types of equity, advisory shares generally don’t include voting rights—meaning the holder has no voice in making major company decisions like electing board members, approving significant transactions, or setting company policies.

Equity

Equity represents ownership in a company, and companies of any size—startups or established firms alike—might offer it to employees, investors, founders, or even advisors in exchange for labor, capital, or risk-bearing investments. While it represents a claim on the company’s future profits, rights and privileges can vary depending on the specific type of equity.

Regular shares

Founders and, in some cases, early team members typically receive regular shares. They usually come with full shareholder rights, including decision-making privileges and access to financial disclosures. These shares give holders a voice in shaping the company’s direction.

How do advisory shares work?

Advisory shares are a great way to build a strong, high-impact relationship between a company and an advisor. They’re similar to traditional stock awards but come with a few differences that make them a better fit for advisory roles:

• Equity percentage: Advisory shares typically make up a small portion of a company’s total equity—often between 0.1% and 1%—depending on the advisor’s experience and contributions. 
• Vesting schedules: Like other forms of equity compensation, advisory shares are usually distributed gradually rather than all at once. A common setup might be two years with a six-month cliff—meaning the advisor needs to stay on board for at least six months before receiving any shares. After that, shares typically vest monthly over the remaining term.
• Legal agreements: Formal agreements govern advisory share grants, outlining expectations, confidentiality terms, conflict-of-interest clauses, and the specifics of the equity grant.
• Tax considerations: Depending on how a company structures advisory shares—such as restricted stock units or stock options—they can have different tax implications. The timing of vesting and how an advisor exercises them can affect how much they owe in taxes.

Types of advisory shares

When deciding on advisory shares, companies often choose between two common structures—Restricted Stock Units (RSUs) and stock options. Both let companies customize compensation based on financial flexibility and long-term growth goals:

Restricted Stock Units (RSUs)

RSUs promise company stock to an advisor at a future date if they meet certain conditions, like staying engaged for a set period or hitting specific milestones. They don’t provide shares immediately—instead, the advisor receives them once they fully vest, and they hold real value at that point.

Taxes on RSUs come into play when the advisor receives the shares, so they pay ordinary income tax on the fair market value at that time. This includes federal, state, and local taxes. Some companies allow advisors to sell part of the shares right away to cover tax obligations.

After vesting, the advisor can hold onto the shares and hope for future appreciation or sell them and pay capital gains tax on any increase in value since vesting.

Stock options

Stock options give an advisor the right to buy shares at a set price (strike price) after they vest. They don’t offer immediate value because they only become worth something if the company’s market price rises above the strike price.

Taxes on stock options vary depending on the type (non-qualified or incentive), and advisors may owe taxes when they exercise or sell the shares.

Stock options can bring real rewards if the company’s value rises. However, if the stock price stays below the strike price, the options might expire without value, which creates more risk for the advisor.

Who gets advisory shares?

Not every advisor qualifies for advisory shares. Instead, advisory shares are for people who bring something your internal team doesn’t yet have. An advisor’s experience, contribution, and alignment with the company’s goals determine whether they receive equity—and, if so, how much. When thinking about what advisors do and how their know-how can help your company grow, consider those who:

• Have industry expertise that would help guide the company to success
• Offer strategic guidance on fundraising, product development, international expansion, foreign markets, or branding
• Provide valuable introductions to investors, customers, or key partners
• Lend credibility to the company through their reputation and network

The importance of advisory shares for startups

One of the biggest perks of advisory shares is that they allow you to tap into the experience, insights, and networks of the greats who came before you—and that’s priceless. But enlisting the guidance and wisdom of advisors can lead to other payoffs for your company:

• Team up with proven pros: An attractive advisory shares plan shows senior experts that you value their insights and want them to play an active role in your company’s growth. It’s a way to say, “We want you on our side,” and give them a tangible stake in your success.
• Turn alignment into action: Equity-based compensation keeps advisors’ interests aligned with your long-term business goals. When advisors share in your wins, they’re more likely to be invested in your growth—and work alongside you to keep your company growing.
• Learn from the legends: Advisors have deep industry knowledge and networks that they’ve spent years building. They know the do’s, the don'ts, cunning hacks, and savvy shortcuts—lessons they’ve learned from all their time in the field. They may also have the resources to build bridges that take your company to places you might not reach on your own. 

Offer competitive benefit packages with Oyster

All great companies need top talent. But for the greatest companies, that goes beyond employees. Advisors bring a wealth of industry know-how, strategic insights, and valuable connections. An attractive advisory shares plan helps draw them in and keeps them invested in your company’s growth.

Oyster’s Benefits Advisor and Equity Assessment tools help you craft personalized, competitive advisory share packages that reflect your unique needs and industry benchmarks. And with Oyster’s Total Rewards, you can manage equity, benefits, and payroll in one place—so you can support your advisors confidently and consistently as your company grows.

See how Oyster can help you attract and retain top advisors who share your vision. Book a demo to learn more.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.