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Stock Options – How to Avoid Common Mistakes

Stock Options – How to Avoid Common Mistakes

 

Photo Credit: Tax Credits

Stock options have the potential to show great reward and gain for employees who value them and are responsible with their grants. The end result of your stock option experience is directly dependent upon the amount of attention that is shown to the relevant details. Keep in mind that changes in the environment and in the climate can affect the value of your stock options.

There are a series of common occurrences that could impact your stock options. Be sure to educate yourself on these events so you can properly plan for your financial future. Your stock option agreement should have all the necessary information to further prepare yourself for the following situations, should they ever occur.

They are:

Termination: No one enjoys getting the boot at work, but if for some reason your employment is ended, it will be good to know how your personal stock options could be affected. Take this into consideration when questioning your employment.

Disability: Depending on your equity compensation plan and your individual stock options, your grants could be affected if you are unable to work due to injury or disability.

Market changes: A fluctuation in the stock market is to be expected; the value of stock options will commonly increase and decrease according to the market climate and can affect your exercise and sale timing. Your documents will have detailed information on your exercise options.

Divorce: Division of marital assets is not always something you can plan for. However, you can make yourself aware of your choices if the situation ever does occur.

Taxes: As with any equity compensation plan, there are specialized procedures for taxation. Each stock option will have various taxations, and in order to properly plan for any additional taxation or change in taxes, employees must be aware of the rules and standards set in place in relation to their equity compensations.

Change of control: Any shift of power, whether it be a merger or an acquisition can greatly affect a stock option plan and an employee’s options for exercise etc. Being familiar with the plan will prepare a stockholder for any change that may alter their options and will explain what they are able to do with their shares during a shift in power.

Here at Stock Connections, we specialize in equity compensation plans.  If you have any questions, we can help. Give us a call!

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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