A reader asks: My co-founder and I are ready to hire a couple of key employees, and one of our advisors suggested we set-up a stock option plan and offer that as an incentive. What is a stock option and what are some of the issues we need to worry about?
Answer: The formal answer here is: An employee stock option is a security that gives select staffers the right to buy a certain number of shares of the company’s common stock at a predetermined price at some point in the future. The answer that might mean more to you, though, is: Options are a way to give employees an incentive to work harder to ensure the company succeeds, since as the stock price increases, their options gain value.
Because it provides employees with this opportunity to benefit directly from any gain in the company’s value, stock options are quite common in startups. From a founder’s perspective, they’re appealing since they avoid any cash outlays and align the interests of the owner and workers.
To read the full, original article click on this link: Issuing stock options? Here’s what you need to know | VentureBeat
Author: Scott Edward Walker
