Advisory Shares: What Founders Need to Know
Advisory shares: A founder’s guide
Author: The Carta Team
Read time: 11 minutes
Published date: 6 November 2025
Learn how advisory shares work for early-stage companies, and how to start issuing equity to your advisors with this comprehensive guide.
Contents
- What are advisory shares?
- Why grant advisory shares?
- What types of equity can you grant advisors?
- How to structure an advisory share grant
- How much equity should you give an advisor?
- How to create an advisor agreement
- How to structure vesting for advisors
- How to manage advisory shares
- Understanding tax implications
- Conflicts of interest
- How to talk to an advisor about equity
- Issue advisory shares the right way
- Frequently asked questions about advisory shares
What are advisory shares?
Advisory shares are a form of equity compensation given to a company's advisors in exchange for their expertise, strategic guidance, or industry connections. Granting advisory shares is a common strategy for early-stage companies to bring high-level guidance to the company without draining their bank account.
Why grant advisory shares?
There are multiple benefits to granting advisory shares:
- Conserve cash: For an early-stage startup, every dollar counts. Offering equity allows you to preserve your cash runway for critical needs like product development, marketing, or hiring your first employees.
- Align interests: When an advisor has an ownership stake, their success is tied to yours.
- Attract top talent: Offering equity in the business can attract high-caliber advisors.
- Reward contributors: Ensure that advisors have “skin in the game” tied to a vesting schedule.
What types of equity can you grant advisors?
The two most common forms of advisory shares are restricted stock awards (RSA) and stock options. Here’s a simple breakdown:
| Feature | Restricted stock awards (RSA) | Non-qualified stock options (NSO) |
|---|---|---|
| What it is | A grant of actual company shares | The right to buy shares in the future |
| Ownership | Advisor owns shares from the grant date | Advisor owns shares only after exercising |
| Common usage | Very early stages, pre-funding | After company establishes a valuation |
How to structure an advisory share grant
Issuing equity to your advisors works much like any other type of equity issuance. This includes determining the number of shares or options being granted, the vesting schedule, and ensuring it aligns with your company’s growth and the advisor’s contributions.
How much equity should you give an advisor?
While there's no magic number, there are established market standards. The amount of equity varies based on the advisor's experience and the company's growth stage.
How to create an advisor agreement
A formal, written advisor agreement is essential. It should set clear expectations and include the advisor’s specific roles, responsibilities, expected time commitment, and the exact number of shares or options being granted.
How to structure vesting for advisors
Advisory share agreements often have a two-year schedule, vesting monthly with no cliff, as advisors deliver most of their value upfront.
How to manage advisory shares
Regular assessments of your advisor’s contributions against agreed-upon goals are crucial. Manage the dilution of equity and its impact on existing shareholders carefully.
Understanding tax implications
Be aware of the tax consequences for both parties when issuing advisory shares. Evaluate the type of shares or stock awards you provide.
Conflicts of interest
Establish clear guidelines and transparency regarding the advisor's role and expectations to mitigate risks associated with competition.
How to talk to an advisor about equity
Discuss the advisor’s potential investment in your company instead of offering advisory shares. This ensures they have a stronger motivation to deliver value.
Issue advisory shares the right way
Managing your company's ownership professionally from day one builds trust with stakeholders and enhances attractiveness to investors.
Frequently asked questions about advisory shares
What is the difference between advisory shares and a stake in the company?
An advisory share grant gives an advisor an ownership stake in the company, usually smaller than a founder's allocation.
Can an advisor sell their advisory shares?
For a private company, advisors can typically sell their shares during company-approved liquidity events.
How do advisory shares differ from employee stock options?
Advisory share grants are usually smaller, have faster vesting, and follow different legal and tax rules compared to employee stock options.
When should I offer advisory shares?
Offer advisory shares only after defining the advisor’s role and value of their involvement is clear, using a properly documented agreement.