The non-employee director stock option prospectus explains the stock option plan to the non-employee directors. It addresses the director's right to exercise the option of buying common stock in the company, along with explaining the obligations of the non-employee director where taxes and capital gains are concerned.
Massachusetts Nonemployee Director Stock Option Prospectus
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US-TC0915
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FAQ
qualified stock option (NQSO) is a type of stock option that does not qualify for special favorable tax treatment under the US Internal Revenue Code. Thus the word nonqualified applies to the tax treatment (not to eligibility or any other consideration).
In the case of both private and public companies, stock options are used instead of simply "giving" shares to employees. This is done for tax reasons. The only time when shares can be "given" without adverse tax consequences is when a company is founded, i.e. when the shares have a zero value.
NSOs are typically used by more mature companies for higher-paid employees. These stock options are also given to contractors, consultants and other non-employees if companies want to give them more than $100,000 worth of stock annually.
Many startups, private companies, and corporations will include them as part of a compensation plan for prospective employees. Companies often offer stock options as part of your compensation package so you can share in the company's success.
Non-qualified stock options offer workers, whether independent contractors or regular employees, the right to obtain a certain amount of the company shares for a set price. Employers tend to offer NSOs as an alternative type of compensation, to make sure they remain loyal and work for the company's best interests.
A share option is a contract issued to an employee (or another stakeholder) giving them the right to purchase shares in a company at a later date for a predetermined strike price. Share options grant you the ability to buy those shares and become a shareholder in the future.
What are non-qualified stock options? Non-qualified stock options (NSOs or NQSOs) are a type of stock option that does not qualify for tax-advantaged treatment for the employee like ISOs do. NSOs can also be issued to other non-employee service providers like consultants, advisors, and independent board members.