Companies use stock options to attract, motivate, and motivate top talent with competitive financial compensation.
The life cycle of a typical unqualified stock option consists of four phases: when the stock option is granted, when it vests, when it is exercised, and finally when it is sold.
Are you adding the stock option via a connection or manual entry first?
By using a connection, the customer’s data is passed on and brings most of the relevant data to the consultant.
Pro Tip: A common best practice for linked stock options is to unlink the account after all the required information has been added. From there, you should review the grant information for accuracy and make any necessary changes. Sometimes, if the connection is updated overnight, any manual changes you made will be overwritten.
Make sure you have all the necessary information about the stock option, then go to Advanced Facts> Investments> Stock Options / Grants and Add an option plan.
Complete input of the basic Tab, take special care when entering the Ticker symbol and Growth rate.
- Ticker symbol: The description, asset class, sector and current share price are given based on the public trading ticker. The share price is updated based on the daily market value. If the stock option is not recorded because it is for an unlisted company, you can include a wildcard such as “XXX” or “$” in this section.
- Growth rate: This growth rate applies to the current stock price and what the user wants to show that the stock is growing in value over time. This is important for predicting stock options that will be sold in the future.
Adding grants to the stock option
Next, navigate to grants Tab and Add a grant. You will then be asked to enter:
- Approval date: Represents the date on which the customer received the stock option from their employer.
- Approval number: The unique identifier for each grant.
- Type: There are two main types of stock options: non-qualifying and incentive. You need to select the appropriate type of stock option in order for the system to recognize the correct tax treatment.
- Granted shares: The number of shares is included in the grant.
- Note: Only whole shares will vest until the final lock-up period, if all remaining shares are vested. Fractional stocks accumulate over lock-up periods until the stocks add up to a full stock that is vested in the period over which this occurs.
- Exercise price: The exercise price represents the right to acquire shares in the company at a specified price at a later date. Note that unqualified options have an actual price per share that affects the customer’s cash flow.
- Note: Restricted stock units always have an exercise price of USD 0.
- Exercise price discount: The percentage to be discounted from the employer’s share price when the grant is granted.
- Fair market value (FMV) per share when buying (Restricted Stock Grants only): This field opens if a previous vest date has been set for this year. Enter the share price for the previous vest date. If there are multiple previous Vest dates, this is where the Lots tab (explained below) comes into play. This field specifies the cost base for the restricted shares so that the system can correctly calculate the profit (if applicable) upon sale.
- Best before date: The dates by which the customer must generally have exercised the shares so that the grant does not become invalid.
- Shares sold: Enter the number of shares sold prior to the current plan year.
Next you will be asked to enter that Vesting Information starting with the Type of schedule.
For a simple schedule, you need to enter:
- Date of the first vest: Represents the client’s first ability to exercise / exercise part or all of the grant.
- An unqualified option is, but does not have, the client’s first ability to exercise their shares. If you wish, you can postpone the exercise until the expiration date.
- Restricted stock units vest on this date so that the customer is assigned the current value and he owns the shares in full.
- Once the customer has exercised or the shares have vested, the customer can either sell the shares on the same day or keep the shares until a future sale date.
- Vesting frequency: Select the available exercise frequencies (monthly, quarterly, semi-annually or annually).
- Waiting times: The number of blackout periods for the options (enter ‘1’ if all options vest at the same time).
- Shares in the first blocking period: Use this field if the number of shares in the initial vesting period differs from the otherwise consistent vesting period in the remaining periods (e.g. “cliff vesting”). For example, if 50% vest in the first year and 25% in the next two years, enter half of the shares granted here with an annual lock-up period of three years [periods].
If you cannot recreate the client’s schedule with the Simple schedule the Freeform plan This option allows you to manually enter blackout dates and share amounts.
Adding lots to stock options
The Lots The tab is used for stocks that were exercised / vested prior to today and / or that may have been sold prior to today. This field is extremely useful in ensuring that proper taxation is calculated, the remaining shares are correct, and the proceeds may not be counted twice.
Start by choosing the Grant of which the amount was bought. Then enter the following information:
- Purchase date: Enter the date on which the options were exercised. Use a numeric date with a four-digit year (MM / DD / YYYY).
- Note: For restricted shares, enter the vest date. For restricted shares with 83B treatment, enter the grant date. For all other options, enter the exercise date. All dates should only be in the past.
- Purchased shares: Enter the number of options exercised and employer shares purchased.
- Note: For restricted shares, enter the number of vested shares.
- FMV per share when buying: Enter the fair value of the employer shares purchased.
- Note: This amount must be higher than the exercise price of the stock options. For restricted shares, enter the FMV of the shares at Vest.
- Sold?: Choose Yes or No from the drop-down box to indicate whether or not a sale has occurred.
- If Yes The following fields are unlocked:
- Selling price: Enter the selling price of the employer shares sold.
- Date of sale: Enter the date the employer shares were sold. Use a numeric date with a four-digit year (MM / DD / YYYY).
- If Yes The following fields are unlocked:
Complete the Strategy tab
The strategy The tab is used to set the client’s future stock option activity, e.g. B. when the customer exercises or sells the shares.
The Plan strategy can be viewed as the general master strategy you have for your underlying grants. If “Use Plan Strategy” is specified in all underlying grants, it is enabled. In this example, all grants use the Plan strategy.
Note: If the “All shares have been sold” message is displayed in the “Sale” column, the grant will have been fully sold before today and will not affect the customer’s future situation.
The system will default the exercise and / or sell “as soon as possible” when stock options are first added. If the user wants to change any of the strategies, they can click inside Plan strategy, Grant strategyor choose one Individual waiting time adjust the exercise and sales strategy.
Once you have entered all the necessary information for your stock option on the basic, grants, Lots, and strategy Tabs you’re done!
Are you looking for more information about stock options? Log into eMoney and access the knowledge base at Help and look for stock options for FAQs, videos and user guides.
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