Employers may be interested in issuing stock options to incentivize their employees. However, they may not be aware that there are two types of stock options – incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”) – each one having a distinct regulatory regime. Employers also are sometimes unaware of what the tax consequences are of granting and exercising stock options, and upon disposition of the stock under both federal and state law. Finally, employers may not fully understand the federal and state securities laws which may be implicated upon the issuance of options or the disposition of the stock after exercise. The accompanying summary discusses some of the most significant differences between ISOs and NSOs. Employers should consider these differences in establishing and administering a stock option plan.
If you have any questions concerning this summary, feel free to contact Terry Connerton at 412-918-1160, or any other attorney at the firm.