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
2. Non-qualified stock options
Other Equity Types
3. Restricted Stock Units
4. Employee Stock Purchase Plan
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
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
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.
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KB Financial is a wealth management firm based in San Francisco that specializes in financial planning for young professionals, tax planning, and stock option analysis.
