The Indiana Stock Option Plan is a comprehensive and flexible program that facilitates the granting of various types of stock options to employees of companies based in Indiana. This plan offers three main categories of stock options: Incentive Stock Options (SOS), Nonqualified Stock Options (SOS), and Exchange Options. Incentive Stock Options (SOS) are a popular type of stock option granted to employees, which provide them with potential tax advantages. These options allow employees to purchase company stock at a predetermined price, known as the exercise price, and hold it for a specific period of time before selling it. If certain requirements are met, the gains obtained from SOS are considered capital gains and taxed at a lower rate than regular income. Nonqualified Stock Options (SOS) are another type of stock option available under the Indiana Stock Option Plan. SOS offer more flexibility than SOS as they can be granted to employees, consultants, and non-employee directors. Unlike SOS, SOS do not come with the same tax advantages. The gains generated from SOS are generally taxed as ordinary income. Lastly, the Indiana Stock Option Plan also provides for Exchange Options. Exchange Options are unique because they allow employees to exchange their existing stock options for new options with different terms. This flexibility enables employees to modify their stock options in response to changing circumstances or market conditions. By offering these three types of stock options, the Indiana Stock Option Plan ensures that companies can tailor their equity compensation programs to meet the specific needs and goals of their employees. It creates a platform where employees can benefit from their company's success while incentivizing them to contribute to the growth and prosperity of the business.
Indiana Stock Option Plan Stock Option Plan which provides for grant of Incentive Stock Options, Nonqualified Stock Options, and Exchange Options
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There are two types, each with different taxation: nonqualified stock options (NQSOs) and incentive stock options (ISOs). Since the exercise price is nearly always the company's stock price on the grant date, stock options become valuable only if the stock price rises.
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.
Non-qualified stock options are issued at a grant price. The grant price is the price at which you can buy the company stock. Your options come with a vesting schedule. During the time between the grant date of your options and the day they vest, you can't exercise your option.
Generally, ISO stock is awarded only to top management and highly-valued employees. ISOs also are called statutory or qualified stock options.
Nonqualified: Employees generally don't owe tax when these options are granted. When exercising, tax is paid on the difference between the exercise price and the stock's market value. They may be transferable. Qualified or Incentive: For employees, these options may qualify for special tax treatment on gains.
The grant price is the price at which you can purchase shares, and the grant date is the day the stock options are given to you. Vesting is the process of fulfilling the grant (promise). The vesting schedule determines the vesting date - the date when you can begin purchasing stock and using your options.
First things first: You don't have to pay any tax when you're granted those options. If you are given an option agreement that allows you to purchase 1,000 shares of company stock, you have been granted the option to purchase stock. This grant by itself isn't taxable.
NQSOs can be offered to employees and others, such as contractors, advisors, etc. ISOs are only available to employees. Your ability to exercise remaining vested options will be subject to the terms in your employment agreement, which may offer a post-termination exercise window or options expiration date.