The House of Representatives passed a bill that would allow startup employees to defer the tax owed on exercised stock options for up to seven years. The bill, H.R. 5719: Empowering Employees through Stock Ownership Act, would go a long way to support the startup ecosystem by making it easier for employees of private companies to hold on to valuable but illiquid stock.
Founders are often surprised to see how complex it is to enable their employees to obtain stock options. The first step is understanding the difference between the two widely different type of stock options: The Incentive Stock Option (ISO) and the Nonqualified Stock Option (NSO).