As more and more individuals are launching new businesses, entrepreneurs are increasingly using stock options as a way to allow individuals to become investors or to compensate individuals providing services to the fledgling business. However, a Costa Mesa business attorney may explain that new business owners should weigh these considerations when issuing stock options:

Type of Options

A Costa Mesa business attorney can explain that there are different types of options, such as Incentive Stock Options and Non-Statutory Options. The first option usually provides a more favorable tax treatment since tax is only imputed at capital gains rates. In contrast, a Non-Statutory Option is taxed as ordinary income for the difference between the exercise price and fair market value and then once more as a capital gain.

Term

Consider the amount of time that you want to issue the option for.

Amount of Shares

The number of shares may be a numeric number or it may be expressed as an overall percentage. Take into consideration that if the amount of shares is expressed as a percentage, the shares will be diluted if more shares are issued.

Timing of Vesting

Stock options may vest at different times. For example, vesting may occur at the time of employment. A portion may vest at a later time, such as after a year of continued employment. Stock options can also be conditioned on other objective criteria, such as business growth, profit or number of customers.

Legal Assistance

For more information on stock options, contact a Costa Mesa business attorney from Daily Aljian LLP.