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Employee Stock Option Services
Overview of Employee Stock Options
Employee stock options give you the right to purchase a predetermined number of shares in your company's common stock at a specified price (grant price) for a set period of time, generally as long as 10 years. If you don't exercise them before the end of the time period, your employee stock options will expire, and you can no longer exercise them. Understanding stock options requires keeping some important facts in mind. It's important to realize that you don't own the shares until you actually purchase them. After exercising your stock options to purchase the shares, you can either sell the shares at the current market price or hold them and sell them later.How Employee Stock Options Are Used by Companies
Companies typically use employee stock options as a way to retain and attract employees and tie part of their compensation to the company's performance. As many as 10 million Americans now receive employee stock options, up from about 1 million in 1992.1Incentive Stock Options Versus Nonqualified Stock Options
Two types of employee stock options exist -- incentive stock options and nonqualified stock options. In general, the two types differ in their tax consequences to you. Incentive stock options:• Meet IRS requirements for special tax treatment
• Are not subject to ordinary income taxes when you exercise them, but you must hold your shares for a specified time period
• May subject you to the alternative minimum tax when exercised
• Are subject to capital gains tax when shares are sold after the holding period
Nonqualified stock options:
• Don't qualify for special IRS tax treatment
• Are subject to ordinary income tax when you exercise the stock options
How A.G. Edwards Can Help You Exercise Your Employee Stock Options
Your A.G. Edwards Financial Advisor can provide you with a variety of helpful stock option services, including a free, personalized stock benefit analysis (view a sample report - PDF) and help developing a plan for exercising your employee stock options.
1National Center for Employee Ownership, Oakland, Calif.
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