Alignment of Interests: By providing you with a stake in the company, the company's goals of growing shareholder value are aligned with your interests of maximizing your own compensation. The goal is to motivate you to do your collective best work to enhance the company's performance.

Employee Retention: Equity compensation, especially options with vesting periods (more on that below), could help encourage you to stick with the company for the long term. As your equity vests over time, you have a financial incentive to remain with the company.

Attracting Talent: Startups and companies in competitive industries often use equity compensation as a way to attract and retain skilled and motivated employees, even if they cannot offer high salaries initially.

Stock Options: Stock options are not actually ownership in your company (at least not immediately). They provide you the right to buy a stocks (shares) in the company at a pre-set price per share. This price is usually called an "exercise price" or "strike price". In order to turn stock options into shares in the company, you will have to exercise the stock options by paying an "exercise cost" which is equal to the exercise price times the number of stock options that you are looking to convert.

Stocks (Shares): These shares represent partial company ownership, and the employees become shareholders, often with the same rights as other shareholders. For employees (and founders), these shares are usually in the form of "common shares".

Incentive stock options (ISOs): In the United States, this is a type of stock option that may qualify for a different tax treatment that is intended to be more favorable to stock option holders. Unlike other types of options (i.e. non-qualified stock options), you usually don’t have to pay taxes when you exercise ISOs. Canadian companies may still use the term ISOs for their stock options, but they will have different tax treatment than in the US.

Non-qualifying stock options (NSOs): In the United States, this is a stock option that has a different tax treatment than ISOs. If you have been granted NSOs, you will typically pay taxes both when you exercise your stock options and also when you sell the shares in the future. If your stock options say that they are NSOs, you may want to speak to a tax professional to understand your tax exposure and costs beyond the exercise costs.

Employee stock option plan (ESOP): Stock options are usually granted based on an employee stock option plan. The plan is a document that outlines the terms of your stock options including items like "vesting schedules". If you have stock options granted by a Canadian company, their tax treatment will depend on the status of the corporation and whether it is considered a Canadian Controlled Private Company (CCPC). It's important to confirm with your company if it is considered a CCPC for your own tax planning purposes.

Restricted stock units (RSUs): Restricted stock units give you interest in your company but they don't become effective until they meet certain conditions. These conditions are the "restrictions" and can be time-based (like a vesting schedule) or based on hitting certain performance milestones.