Stock Option Plan which provides for grant of Incentive Stock Options, Nonqualified Stock Options and Stock Appreciation Rights

What Is a Non-Qualified Stock Option (NSO)? A non-qualified stock option (NSO) is a type of employee stock option wherein you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option.

Incentive stock options (ISOs) can only be granted to employees. Non-qualified stock options (NSOs) can be granted to anyone, including employees, consultants and directors.

Non-qualified stock options may go to employees, company partners, vendors, or others that aren't on the company payroll. These stocks function much like ISOs, except you pay taxes on the spread between the grant price and exercise price at your standard income tax rate.

Depending upon the tax treatment of stock options, they can be classified into qualified and non-qualified stock options. Qualified stock options are also called Incentive Stock Options (ISO). Nonqualified: Employees generally don't owe tax when these options are granted.

Incentive stock options, or ISOs, are options that are entitled to potentially favorable federal tax treatment. Stock options that are not ISOs are usually referred to as nonqualified stock options or NQOs.These do not qualify for special tax treatment.

An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit. The profit on qualified ISOs is usually taxed at the capital gains rate, not the higher rate for ordinary income.

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.