It's less that it's a nightmare, and more that there aren't enough people that have done it to know the right way to go about it. We've been trying for 6months to get an ESOP off the ground, and have had a hard time finding an accountant/lawyer who knows their way through it, EVEN THOUGH we know what needs to be done.

Mmmm. Strange.

Anyways, the major problem is that shares and options are taxed like income at the time of issue, with no easy way to defer the tax bill. This makes it essentially untenable to hand out equity to employees. This then makes it a lot harder to employ people as a bootstrapped startup.

there are a lot of legal fees to set up the kind of employee equity plan that can cost a few thousand dollars in the US. we're talking 10-30 times as expensive.