Dating of stock option grants
For employees, the main disadvantage of stock options in a private company—compared to cash bonuses or greater compensation—is the lack of liquidity.Until the company creates a public market for its stock or is acquired, the options will not be the equivalent of cash benefits.
In this example, the 0,000 test (as applied on the date of grant) is satisfied because the “value” of the option that is first exercisable in each of this year and next is less than 0,000 (5,000 x = ,000).
Stock option awards are a frequently used tool to incentivize service providers.
However, since options do involve some complexity, seeking strong corporate legal counsel is advised to ensure that mistakes (especially in regards to tax and securities law compliance) do not occur.
Generally, the company wants to adopt a plan that gives it maximum flexibility.
An “early exercisable” stock option is like any other stock option awarded to an employee, consultant, director or other advisor, except that the holder may exercise the option before it has vested.