Incentive Stock Options (ISOs) are a unique form of equity compensation that are primarily governed by Internal Revenue Code Section 422. ISOs provide attractive ownership opportunities for key employees of companies, yet with these opportunities come significant investment, tax, risk management and liquidity planning needs.
Does your company offer an employee stock purchase plan or ESPP?
An ESPP can be a great way to get a discounted deal on your company’s stock. And if your company does well, the stock may increase in value. On the other hand, you'll want to be careful about overloading on your company’s stock, lest it loses value or your company suffers financially - you could find yourself with worthless stock and in extreme circumstances, even jobless.
If you have a job at a company that offers incentive stock options (ISOs), you may be excited and curious about how to understand, exercise, and benefit from them. ISOs are the most common type of stock option, although, under certain circumstances, your employer may offer you non-qualified stock options (NSOs or NQSOs) which are taxed differently.
You’ve done your due diligence when it comes to shoring up your affairs: bequeathed home or property made plans for where your money should go, or even made plans for the end of life care and health directives. You have responsibly planned for what lies ahead and now you’re all set, right?
Employee equity & stock options are a major part of the modern compensation plan. That’s certainly the case for my financial planning clients. Unfortunately, a search for the best approach to managing your equity opens the door to an alphabet soup full of jargon and tax strategies that can give you a headache.
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