ESOP Guide for Startups#
What is ESOP?#
Employee Stock Option gives employees right to buy company shares at predetermined price.
ESOP Lifecycle#
- Grant - Options allocated to employee
- Vesting - Earn right to exercise
- Exercise - Convert options to shares
- Sale - Sell shares to realize gain
Tax Implications#
At Grant#
- No tax
At Vesting#
- Perquisite tax (AMT applicable)
At Sale#
- Capital gains tax
ESOP Advantages#
- Aligns employee interests
- Attracts talent
- Retention tool
Conclusion#
ESOPs help startups attract and retain talent.