We totally get that equity can be a bit confusing. Our guide is here to help you find all the information you need, whether you're using Carta or Shareworks.
Are you receiving stock grants from your company? Congratulations! 🎉 This benefit can have a significant impact on our financial well-being, especially for those of us working in startups.
Understanding the intricate details of equity can be quite daunting. If you find yourself uncertain about the specific type of grant you have and its potential implications, don't worry! This guide is here to help you by providing valuable links that will assist you in gaining clarity.
You can start with our complete guide to starting a new job with equity. Below is a TL;DR of the different types of stock grants available.
What type of stock grants are you earning?
In the U.S., there are three common types of employee stock options:
- Incentive stock options (ISOs): ISOs give you the ability to purchase company shares at a specific price. They enjoy tax advantages, and are taxed under the alternative minimum tax (AMT) system, rather than the income tax system.
- Non-qualified stock options (NSOs): NSOs give you the ability to purchase company shares at a specific price. They are taxed under the income tax system, and typically enjoy fewer tax advantages compared to ISOs.
- Restricted stock units (RSUs): RSUs are different from ISOs and NSOs in that you don’t purchase shares — you earn them outright, as long as you remain employed or reach specific performance targets. They’re taxed as ordinary income as they vest.
In general, ISOs and NSOs are common at earlier-stage startups, while RSUs are more popular at late-stage startups that are preparing for an exit, and at publicly traded companies.
If you want to access the specific information about your grant, you can refer to our guide for Shareworks or Carta.
Here are some other helpful links from Secfi Learn 📚