Who is eligible for incentive stock option?

ISOs can only be granted to employees. So independent contractors and members of the board of directors who aren’t otherwise employees can’t receive ISOs. Only the first $100,000 that becomes exercisable during any 12 month period can qualify for ISO treatment.

Can part time employees get incentive stock options?

Incentive stock options, or ISOs, can only be given to full-time or part-time employees. Other rules have to be followed in order to maintain ISO status, such as stockholders approving the option plan.

What is the purpose of incentive stock options?

An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit. The profit on qualified ISOs is usually taxed at the capital gains rate, not the higher rate for ordinary income.

What is the difference between ISO and NQ stock options?

Incentive stock options are reserved for employees, offering them an opportunity to buy stock at a discounted price. What’s more, ISOs are subject to the capital gains tax rate. Non-qualified stock options may go to employees, company partners, vendors, or others that aren’t on the company payroll.

How do employees explain stock options?

An employee stock option is the right given to you by your employer to buy (“exercise”) a certain number of shares of company stock at a pre-set price (the “grant,” “strike” or “exercise” price) over a certain period of time (the “exercise period”).

What is the difference between restricted stock and options?

Restricted shares represent actual ownership of stock but come with conditions on the timing of their sale. Stock options are the right to buy a certain number of shares at a certain price in the future, with the employee benefiting only if the stock price then exceeds the stock option price.