How the instrument works
A phantom plan is a bonus agreement indexed to share value: the holder is credited notional units, and at a defined event — exit, dividend round, milestone — the company pays cash mirroring what those units would have earned. SARs are the appreciation-only cousin: payout equals the rise above the grant value. Everything lives in contract; the cap table stays untouched.
The tax and accounting truth
Payouts are wage, taxed through payroll at progressive rates — the trade against real equity’s capital treatment, accepted for the simplicity bought. On the company side the plan is a liability that grows with valuation: bookkeepers accrue it, and exit models include it — the honest line every phantom plan should state on page one.
Where light beats real
Phantom wins for advisers and fractional roles, for country hires where the STAK travels awkwardly, and for companies wanting participation before the structure conversation. Real equity wins for the core team — certificates through the STAK with capital treatment at exit: the certificate route and the option rules. Many scale-ups run both: STAK for the builders, phantom for the ring around them — inside the standard chart: the skeleton.