Reviewing and approving option exercises
When an option holder enters an exercise through their portfolio, the designated option approver receives an email regarding the pending approval (bank transactions do not begin until the exercise is approved). By default, exercise approvals are sent to the option signatory if no approver has been selected.
Once logged in, the exercise approver will have a task to review the option exercise(s).
The exercise approver can also go to Transactions > Exercises and approve the exercise from the exercise ledger, which tracks all option exercises.
It is important to note that employees with NSO exercises will display a withholding link. Click this to review that the fair market value and the estimated tax withholdings are both correct, now the tax withholding information for the grant is viewable (For international employees, you will need to click "approve" before editing the tax withholdings). The amount shown is the maximum amount allowed by the federal and state laws. You can adjust them lower according to option holder's liability, if needed.
Note: the withholding amount is not remitted to IRS by Carta. After Carta collects the withholding amount and deposits it with the total exercise amount into the company's bank account, the company is responsible for remitting the taxes to IRS.
For NSO exercises: You can edit the tax withholdings by clicking the pencil next to the tax line you wish to modify.
Once the FMV and tax withholdings have been verified, click 'Approve option exercise' and sign the confirmation of exercise.
NOTE: If there are no gain on exercise, NSO tax withholdings will not occur.
For ISO exercises, there are no tax withholdings at the time of exercise. Once you approve the exercise, sign and click 'Approve option exercise.'
Once signed, the bank transaction will begin and pending ACH approval by the holder's bank, the exercise will be processed. Following the fund's transfer, company officers will receive notification to review and sign the associated stock certificate that the platform will automatically generate. The transfer of funds process takes 5-7 business days.