Incentive vs. Non-Qualified Stock Options: Does It Really Matter?

I recently assisted an emerging company client of mine with a fairly common project in the world of corporate law: the adoption of its first stock option plan. The benefits of issuing stock options and other forms of equity-based incentive compensation are well documented for start-up and emerging companies, and the circumstances for my client were no exception. The company wanted to supplement its limited ability to compensate its employees with cash by issuing stock options that would vest over time. This approach often aligns the interests of the company with its employees by incentivizing the employees to remain employed with the company over time while at the same time giving them a tangible stake in increasing its value.