Private companies using equity compensation face six major pitfalls that can derail compliance and effectiveness. Process pitfalls arise from poor communication and lack of standardized workflows, while spreadsheet reliance creates audit, security, and error risks. Modification mistakes, such as changes to vesting or exercise terms, can trigger unexpected accounting and tax consequences. Tax traps like ISO/NQSO splits, 83(b) elections, and payroll withholding add further complexity. Expanding internationally multiplies risks due to differing regulations across jurisdictions. Finally, short-term thinking leaves companies unprepared for growth or IPO transitions. Addressing these pitfalls requires strategy, automation, and forward planning.

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