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Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.

Basics: Grants

After a grant of stock options, am I treated as a shareholder?
No. You do not become a shareholder until you exercise a stock option (i.e. exercise your right to purchase the shares).

Often at privately held companies, to become a shareholder you must agree at exercise to be subject to a variety of restrictions on your rights as a shareholder. These limitations include the ability to sell shares to third parties or a covenant to vote for the founders when electing company directors.

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