Depending on the stage of development and the type of business, there are different ways of compensating your advisory board. So let’s get practical.
First, a few assumptions: you are a startup and there have been relatively few stock transactions, but the stock should have value in the future, either through an IPO or merger. In this case, equity compensation is definitely the way to go. Equity compensation should be structured to avoid current taxable income to the recipient. This can be accomplished through either stock options or restricted stock.