Along with the other general corporate legal services InnovaCounsel provides, another service we offer our clients is setting up and governing stock option and purchase plans. Learn more about what these plans entail below.

An employee stock purchase plan or ESPP is a company-run program where employees can purchase company shares at a discounted price. Employees contribute to the plan through payroll deductions that build up between the offering date and the purchase date. Once the purchase date arrives, the company uses the funds to purchase shares in the company on behalf of the employees who participated.

Types

These plans are available in two different categories: qualified and non-qualified. Qualified plans require approval of shareholders before implementation. Every person participating in a qualified plan has equal rights. Non-qualified plans do not have as many restrictions, but they also don’t have the after tax-deductions that come with a qualified plan.

Dates

The offering date corresponds with the grant date for the stock option plans. Participation in the employee stock purchase plan can only begin after the offering period has started. Some offering periods have multiple purchase dates. Each purchase date marks the end of the payroll deduction period.

Eligibility

Many of these plans have restrictions in place regarding employee eligibility. Employees who haven’t been with the company for a specific amount time, generally a year, will not be eligible to participate until they meet the requirements. All employees who have been with the company for over a year are eligible, but are not required to participate in the ESPP.

Taxes

The rules about taxing the proceeds from these plans can be complex. Having a corporate attorney available to determine the proper tax treatment will keep the company from making costly mistakes.

ESPPs are fairly straight forward with minimal administrative costs, which is why many companies turn to them. The attorneys at InnovaCounsel can help companies evaluate the different options and can set up the employee stock purchase plans for their employees