Stockholders elect the Board of Directors and are usually required to approve major corporate events such as mergers or sale of the business. Except for restrictions on transfer under the securities laws, once a share of stock is issued it can be freely transferred in the absence of an agreement to the contrary. An option is a right to purchase a security at a given price. Employees, directors and consultants are most often granted options to purchase Common Stock, as opposed to other securities. An optionholder does not actually own the underlying stock, is not entitled to vote or to receive notice of stockholder meetings and does not have the same right that a stockholder has to receive financial information.
Options are typically nontransferable except in limited circumstances.
The answer is yes, if all things are equal, but the tax code fouls things up over time. You see, under Section 83 of the Internal Revenue Code if someone receives stock in connection with providing services, he or she will receive ordinary income equal to the excess of the fair market value of the stock over what he or she paid for the stock. At the early stages of a venture the fair market value will be relatively low so this is not a problem. It's here that options start to come into play. I explain to Bill and Mitch that options are generally not subject to Section 83 and therefore the recipient does not have any taxable income when he or she receives the option.