Massachusetts Stock Option Agreement
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How to fill out Stock Option Agreement?
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FAQ
When you get an option to buy securities through your employer, it does not immediately affect your tax situation. An option is an opportunity to buy securities at a certain price. The securities under the option agreement may be shares of a corporation or units of a mutual fund trust.
Stock options are a form of compensation. Companies can grant them to employees, contractors, consultants and investors. These options, which are contracts, give an employee the right to buy, or exercise, a set number of shares of the company stock at a preset price, also known as the grant price.
Benefits of offering stock options to employees Employees who own shares of stock have an additional financial incentive for performing well at work beyond their regular salary. They want to help the company grow so the stock price will go up and they can make a significant profit on their initial employment package.
Stock options allow you to save cash instead of spending money on high salaries. It can also motivate employees to stay and make your company a success so that it will eventually be acquired or have an initial public offering, which will provide value to their shares.
A stock option provides an employee with the opportunity to purchase a set number of shares of company stock at a certain price within a certain period of time. The price is called the ?grant price? or ?strike price.? This price is usually based on a discounted price of the stock at the time of hire.
Stock option grants are how your company awards stock options. This document usually includes details about: The type of stock options you'll receive (ISOs or NSOs) The number of shares you can purchase. Your strike price.
The excess of the fair market value of the stock at the date the option was exercised over the amount paid for the stock is taxed as compensation at the time the stock is sold. Any additional profit is taxed as capital gain.
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