Employee Stock Options

A resource hub filled with expert advice about how to handle your company stock options.

What are employee stock options?

Tech companies usually offer employees equity as part of their compensation package. Though you may generally refer to these as employee stock options, they’re technically considered equity compensation.

Incentive stock options, non-qualified stock options, restricted stock units, and employee stock purchase plans are all types of equity compensation. As the name indicates, access to employee stock options is contingent on your employment with the company.

Your employer may give you equity compensation in two ways:

  • Offering you the right to purchase company stock, or
  • Granting shares to you outright

No matter the method, equity compensation always ends in you owning shares of your company’s stock. Unlike other forms of compensation that have fixed value, company stock options have the potential to appreciate

Owning a portion of a growing company can set you up for a life-changing payout down the road, so how you handle this opportunity matters.

Understanding the 4 types of equity compensation

Stock Options

These give you the right to purchase your company’s shares at a fixed price. There are two types of employee stock options:

1. Incentive Stock Options

Incentive stock options offer you the chance to invest in your company’s success at a locked-in price, which could lead to considerable tax savings if played right—so dive in, learn their rhythm, and let’s strategize your move toward a more rewarding stake in your future today.

2. Non-qualified stock options

Nonqualified stock options (NSOs), offer a flexible way to partake in your company’s growth, nudging you towards seizing this opportunity to amplify your financial portfolio—why not explore how NSOs can be your next smart move towards financial empowerment?

Other Equity Types

3. Restricted Stock Units

Restricted stock units are a grant of shares that your employer releases to you on a time-based vesting schedule.

4. Employee Stock Purchase Plan

This type of equity compensation allows you to contribute a percentage of your paycheck toward purchasing shares of your employer’s stock, usually at a discount.

Unlike the above categories, participation in an employee stock purchase plan is voluntary, as is how much you contribute to it.

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A Three-Pronged Approach to Maximize Your Equity Compensation

We use this process with our clients to help them create wealth and avoid any blunders.

01

Financial Planning

No matter your situation, your financial plan should have a single goal: To maximize the cash you eventually receive to fund your investments.

Stock options present you with many decisions around things like when to exercise and sell, and how much to contribute to your stock purchase plan. Your choices here matter.

02

Investment Management

You have a massive opportunity to make great financial choices. But that also means bad decisions can be costly — potentially-missing-out-on-millions costly.

Managing your investments helps you avoid losses and build more wealth.

03

Taxes

We always tell our clients, “Be tax aware, not tax scared.”

While taxes shouldn’t dictate what financial decisions you make, they should inform how you make them.

Avoiding tax errors can save you thousands of dollars, so make sure your taxes are accurately prepared and that you make tax-informed decisions.

Financial planning, investment management, and taxes combined in one team ensures that your decisions maximize your eventual cash and don’t waste your big wealth opportunity.

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