Fundraising & Equity
Equity Compensation & Stock Options Guide
Collated by Harry Prabandham
Curated by Rubric Financial
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Types of Equity Compensation
- Incentive Stock Options (ISOs) offer favorable tax treatment for employees (no tax at exercise if held 1+ year) but are limited to $100K vesting per year
- Non-Qualified Stock Options (NSOs/NQSOs) are simpler with no vesting limit but are taxed as ordinary income at exercise on the spread between strike and FMV
- Restricted Stock Awards (RSAs) are actual shares subject to vesting, best for very early-stage when share value is near zero and 83(b) elections are most beneficial
- Restricted Stock Units (RSUs) are promises to deliver shares upon vesting; common at later stages when share values are high and option exercise costs would be prohibitive
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