What is Stock Options? Definition, requirements, and how it applies to your business formation. Learn everything about stock options for LLCs and corporations.
# Stock Options
Stock options give employees the right to purchase company stock at a predetermined price (the exercise or strike price) after a vesting period. If the company's value increases above the strike price, the option holder can buy shares at a discount to their current value. Options are the primary equity compensation tool for startup employees.
Stock options must be granted at fair market value (determined by a 409A valuation) to avoid tax penalties. Employees typically have 90 days after leaving a company to exercise vested options, though some companies offer extended exercise windows.
Lovie's equity management tools help startups track option grants, vesting schedules, and exercise windows across their entire team.