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.
Missouri Nonemployee Director Stock Option Prospectus
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US-TC0915
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FAQ
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.
Qualified stock options, also known as incentive stock options, can only be granted to employees. Non-qualified stock options can be granted to employees, directors, contractors and others. This gives you greater flexibility to recognize the contributions of non-employees.
Some companies choose to offer stock options to independent contractors or consultants as a form of compensation. In these circumstances, the contractor or consultant has the opportunity to own company shares.
For example, if you're based in the US, you can offer ISOs to your domestic employees. However, as you cannot use an EOR to offer ISOs to foreign employees, you would need to offer an alternative, such as NSOs, RSUs, or VSOs.
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. Because NSOs do not meet the requirements of IRS Code Section 422, they do not benefit from the (potential) corresponding tax benefits that ISOs benefit from.
Income tax upon exercise When you exercise NSOs and opt to purchase company shares, the difference between the market price of the shares and your NSO strike price is called the ?bargain element.? The bargain element is taxed as compensation, which means you'll need to pay ordinary income tax on that amount.
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.