The Information Statement is the plain-English companion to your Equity Incentive Plan. This guide covers plan structure, administrator authority, share pool, ISO vs NSO, exercise price and 409A, vesting, post-termination windows, and federal tax treatment.
Key takeaways
- ISOs must be expressly designated in the Option Agreement — the default is NSO.
- ISOs have a $100,000 per-year vesting limit; excess is automatically NSO.
- Exercise price must equal at least 100% of 409A FMV — 110% for 10% stockholders.
- Standard vest: 4 years, 1-year cliff, monthly thereafter — Option Agreement controls.
- ISOs automatically convert to NSOs 90 days after termination, regardless of extended exercise windows.
- AMT at exercise is a real risk with ISOs — always tell employees to consult a tax advisor.
The Information Statement for a Stock Option Plan: A Founder's Guide
Every startup that grants employee stock options must give recipients a written Information Statement (sometimes called a Plan Summary or Plan Prospectus) that explains, in plain language, how the plan works. It sits alongside the full Equity Incentive Plan document, the individual Option Agreement, and the Notice of Stock Option Grant.
Most founders treat it as boilerplate. That is a mistake. The Information Statement is the document your employees actually read, quote back at you, and forward to their tax advisors. When it is unclear, you get repeated 1:1 questions, resentment about vesting mechanics, and — occasionally — real tax exposure for the employee that becomes an HR problem for you.
This guide walks through every section of a standard Information Statement, in the order it appears, with what to say clearly and the mistakes to avoid.
This is founder education, not legal or tax advice. Every stock plan document must be reviewed by qualified employment and tax counsel.
It is a summary of the Equity Incentive Plan. The full Plan document controls.
It is not an offer document under securities laws — the securities exemption (typically Rule 701 in the U.S.) governs that.
It is not individualized tax advice. It describes the general federal tax treatment; employees must consult their own advisors.
That distinction matters. Overstating precision or under-stating uncertainty in this document is what creates liability.
Open by naming (a) the company, (b) the class of stock being offered (almost always common stock at par value $0.0001 or $0.00001), and (c) who is eligible: employees, non-employee directors, officers, and consultants.
State the purpose in one honest sentence: the plan exists to give service providers an ownership stake and to align them with long-term company success. Avoid marketing language. Employees can tell the difference.
Then describe what the plan can grant. A modern startup plan…
Rest…
