There are qualified (a.k.a. "incentive") stock options plans as well as non-qualified stock option plans. The basic difference is that incentive stock options receive special tax treatment, which is better from an employee's perspective, but not necessarily from the company’s.
Incentive stock options are available only for employees. No income is reported when the employee exercises the option, and the entire gain when the stock is sold can be taxed as long term capital gains (instead of regular income). Also, incentive stock options must be nontransferable, and exercisable no more than 10 years from grant, and must have an exercise price at least equal to the FMV at time of grant.
Non-qualified stock options result in taxable income to the recipient at the time they are exercised in the amount of the difference from the exercise price and the market value when exercised. Employers prefer non-qualified stock options because the company receives a tax deduction equal to the amount the stock receipient is required to include as income – the company is not allowed this deduction when using incentive stock options. Nonqualified stock options are issuable to anyone, may or may not have an exercise price and are transferable.
Thursday, February 17, 2011
Sunday, February 13, 2011
Funding Watch
John Kerry is attempting to put through a bill which would ... As summarized at TechCrunch:
The Startup Visa Act grants a temporary work visa to any foreign-born entrepreneur who is able to obtain an investment of least $100,000 from a venture capitalist or a qualified “super angel” investor in an equity financing of not less than $250,000. To gain permanent residency, the entrepreneur must create five new U.S. jobs within two years, raise more than $1 million in venture capital, or generate sales of more than $1 million annually.
This is similar to the EB-5 visa, although it requires a smaller investment up front. Also it appears that the startup must take off - by either raising one million in capital or generate one million in sales in merely two years. Some startups may not be able to fit into this tight schedule. Still, it's another way to get a company off the ground.
The Startup Visa Act grants a temporary work visa to any foreign-born entrepreneur who is able to obtain an investment of least $100,000 from a venture capitalist or a qualified “super angel” investor in an equity financing of not less than $250,000. To gain permanent residency, the entrepreneur must create five new U.S. jobs within two years, raise more than $1 million in venture capital, or generate sales of more than $1 million annually.
This is similar to the EB-5 visa, although it requires a smaller investment up front. Also it appears that the startup must take off - by either raising one million in capital or generate one million in sales in merely two years. Some startups may not be able to fit into this tight schedule. Still, it's another way to get a company off the ground.
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