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Stock Options: 10 Rules for Effective Planning – Part 2

Stock Options: 10 Rules for Effective Planning – Part 2

Photo Credit: Helico

Last week we introduced five of the top ten rules that every individual with stock options should be aware of when making their financial plans. This week we explore the remaining five rules.

They are:

Rule 6 – Know your tax bracket and watch for changes:  The six tax brackets are determined by multiple factors including your income and marginal tax rates. Be sure to find your tax bracket and understand your tax rates as well as any potential changes that could happen throughout the year.

Rule 7 – Know EVERY part of your plan: While stock options are often used as an incentive method for employee retention, this does not always keep employees from leaving the company for a better opportunity, or mean that they will be a long time employee in the first place.  If you are fired or laid off, or even find a more beneficial job, you need to be aware of the outcome of your stock options in the situation whether it be the time in which you can exercise an option or the loss of vested option gains. Always understand the consequences.

Rule 8 – Be aware of vesting schedules: Every company is different and their guidelines for vesting will vary. For this reason, it is important to know the procedures for exercising and vesting as laid out in your stock option plan. Pay close attention to elements like resale restrictions and whether the company pays a dividend on the stocks.

Rule 9 – Know your option type: Be sure to have at least a general understanding of the types of stock options that are available and know which option you have in your plan. Whether you have a restricted stock option, incentive stock option or non-qualified stock option, it will be important to know their differences and the tax obligations that come along with any of the options.

Rule 10 – Chose a quality advisor: Choosing an advisor with an abundance of experience will help ensure a positive stock option process. Here at Stock Connections we are prepared to advise clients on their stock options and offer a beneficial and enjoyable experience.

Stock Connections specializes in working with San Francisco Bay Area companies that are involved in mergers & acquisitions, are raising capital, or creating stock option or other equity plans. We help start-up, private and public firms become – and remain – SEC-compliant. Stock Connections’ services are designed to help both start-ups and established firms comply with SEC and other regulations in their equity compensation programs. If you or anyone you know is looking to get involved with any of the above, we encourage you to contact us today!

 

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