A lot of companies, including startups, have issued empoyee stock option plans (ESOPs) to their employees. Esops are employee benefit plans that offer employees ownership interest in the organisation. They are generally issued at a discounted price, as a part of the employee compensation or is given to drive/reward performance. Employees can exercise their ESOPs after completing a few years of service with the company and on satisfying vesting conditions. It is taxed twice for an employee - when you exercise the option and when you sell it. It is taxed as salary when the option is exercised and as capital gains when the stock is sold.