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Understanding Employee Share Options

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Employee share options (ESOs) are a type of equity compensation that a business can choose to provide their employees with. With this option, your employee has the right to buy part of your company’s stock at a price that you’ve specified during a certain period of time.

There are two different stock options that you can choose to offer to your employees.

The first is what’s known as nonqualified stock options (NQSOS). These don’t qualify for special treatment that incentive stock options receive.

The second is what’s known as incentive stock options (ISOS). These stock options are only available for employees and under certain restrictions. Typically you’ll need to pay taxes when you sell your shares. These taxes will depend on how long you’ve owned your stock shares.

While both can be offered to employees, NQSOS are the most common.

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