The 3 common approaches to equity compensation each have advantages and drawbacks. Stock grants can have unfortunate tax implications. Stock purchase (such as Founder shares) work fine early in a startup's history, but such a purchase becomes expensive later on. And finally, stock options provide a very flexible way of providing equity compensation to employees, board members, advisors, contractors and consultants. Options can also be used to provide additional equity compensation for co-founders. Regardless of which approach is taken, having some form of stock vesting is generally a good idea, whether that is in the form of stock option vesting or founder stock vesting as a declining buy-back right.