Use Employee Stock Options to Make your Business Better

There are many ways that you can make your employees feel better when working for you and the best one among them is to use employee stock options. Although, this is not a common practice for the larger companies, many small ones are using that option to give their employees a sense of ownership. Basically the employee stock options will allow the people, who work with you to buy shares from your company at a specific price. The price of the shares that you will offer to your employees is called strike price, which should be pegged to the value of the stock before it is offered to the employees. They will have the option to buy shares of the company for that price and later on sell it whenever they decide. For example, you let an employee to purchase 10 shares for a price of $1 each. Later on when the price for the stock reaches $3, he or she will sell the shares and will make $20 before taxes. The employees are not required to buy Employee stock options, so when the price of the shares drops, they will not loose any money. However, if you decline employee stock options, you will probably reduce the morale of your employees. So make sure that if you are required to offer this option, you will accept. There are different types of employee stock options and here are the main ones among them:* Incentive stock options will allow the employees to only pay taxes on such options when they are selling them. Furthermore, they will be able to qualify for the 20% long term capital gains tax if they sell the stock 2 years after they had bought them.* Non-qualified stock options will require the employees to pay higher taxes and when they exercise those options, they will be required to pay income tax. However the employees are able to acquire tax deduction on the difference between the market value and the stock price.* Restricted stock, will allow the employees to receive shares from the company, but sell them only after the company reaches a certain goal or after a set period of time. Furthermore, the employees will be required to payincome tax. They can also pay taxes when the options are issued. The employee stock options are a common solution for all the small companies that are offering their employees smaller salaries. In the beginning of the 1990s many of the dot com companies were offering employee stock options, but not all of those, who had taken advantage of that option, were actually able to make some income when selling the stock. By using the employee stock options, you will get the best from your employees. use them at all costs, you do not risk anything when you are doing that. In fact, stock options bring in a sense of belonging for the company among the employees. It also reduces employee turnover as you reward all your key employees with stock options.