Stock Option Plan for Contractors?


I'm starting my first company (software for Reputation Management) and will be contracting 3 guys; 2 full-time paid and 1 who is doing work pro bono. As it happens in the early stages of companies, money resources are very limited so I would like to offer incentive stock option plans to those guys (who I'm planning to employ full-time in the future any way). My question is, can I offer them any stock options and if yes, how it will be calculated if they do not have employment contract with my company?

Thank you,

Incentives Stock Options

asked Apr 18 '11 at 00:55
11 points

1 Answer


You can issue them NQSO (non-incentive stock-options). By definition, ISO can only be issued to employees. Just put in standard vesting based on them having a working relationship with the company (that includes contracting and being employeed), and you are set.

Of course, any stock-option needs to be drafted by competent lawyer, meaning a few thousand dollars of expenses. Don't try to do this at home or you'll mess it up.

Alternatively, you can grant them stock, not options.

answered Apr 18 '11 at 01:21
Alain Raynaud
10,927 points
  • Thanks a lot. Although, when budget is so tight spending another few thousand pounds (UK) does not sound nice... is there any way I can create agreement stating that I'm going to provide them with stock options let's say starting from the day company generates any money? (day 1 = vesting commencement period of their stock option plan). Until we generate money/go public/IPO these stock options are worth nothing anyway... – Kamila 13 years ago
  • I didn't realize you are asking for advice for the UK, not US - so ignore my discussion of NQSO and ISO, it's US only. – Alain Raynaud 13 years ago

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Incentives Stock Options