Stock Awards vs. ISOs vs. NSOs — from The Holloway Guide to Equity Compensation
The following excerpt is from The Holloway Guide to Equity Compensation, a detailed reference with hundreds of resources on stock options, RSUs, job offers, taxes, and more. You can read more from this excerpt, or access the full guide text here.
THE FULL VERSION OF THIS GUIDE ANSWERS QUESTIONS LIKE:
How are stock awards vs stock options taxed?
Are restricted stock awards taxed when granted?
Are taxes the same for stock options and stock awards when they vest?
Are taxes the same for stock options and stock awards when sold?
Because the difference between how stock awards and stock options are taxed is so nuanced, we wrote this section from an employee’s point of view for clarity.
Mary Russell is a lawyer who specializes in equity compensation. Russell recommends each form of equity be used at the appropriate time in a private company’s lifespan: RSUs for later stages, Stock Options with longer exercise windows for early-to-mid stage, Restricted Stock Awards for the earliest stages of a startup.
If you relish tax complexity, you can learn more from:
- EquityZen’s summary of the topic, “Understanding Equity Compensation And What It Means For Startup Employees”
- The Tax Topics coverage of ISOs and NSOs from the IRS
- Joe Wallin’s posts on the Startup Law Blog, “Top 6 Reasons To Grant NQOs Over ISOs” and “Incentive Stock Options vs. Nonqualified Stock Options”
- Investopedia’s post “Get the Most Out of Employee Stock Options”
