4 ms·
Do you have to cash in stock options right after quitting?
Im a little confused with the term "to vest". Let's say I have some stock options where I get 100% of the stock that was promised after 4 years working at the startup (with 1 year cliff).
After 2 years I decide to quit. I have 50% of stock options. Can I wait like 10 years to get the cash or do I HAVE TO get the cash right when I leave the company ?
N.B : I don't have a contract yet, I just want to know what is the normal case, if any
- ant6n 11y agoA stock option is a contract that gives you the right (but not the obligation) to buy stock at some defined price ("strike-price") within some given time frame. Generally, if you want to 'cash in' your options you would first have to exercise your options (i.e. buy the stock at the strike price), and then you can sell the stock -- unless you can sell your options directly, which I'd say is unusual for employee stock options. If you own the stock (rather than options), those generally don't expire, so generally you can just sit on them until you decide to sell. Options may expire at some fixed date in the future, or they may expire some time after you quit your job. If you want the options not to be worthless you have to make sure they don't expire -- you should read the stock option agreement that is part of your employment agreement carefully; and also consult a lawyer. Note that exercising options may be expensive (depending on the strike price of the option), and there may also be tax considerations. For example if the stock is worth 10$, and the strike price is 1$, exercising basically implies you got a 9$ taxable benefit from your company, and you may have to pay taxes on that. This depends a lot on your specific situation and the jurisdiction where you are. Again, consult a lawyer. Also, this is not legal advice. etc etc.
- thomasjan 11y agoSo it all depends on - if the stock of the company is liquid = I can sell or buy it easily - if there is an expiry on stock options Because if Im fired and my options will expire soon and stock is not easy to sell, then I have to pay to get the stock but not sure I can sell it right away, am I right ? What is commonly the case in Silicon Valley for instance ? Do companies buy the stock from people who are fired/quit ? What is a common expiration date for stock options ? Thanks
- ant6n 11y agoMost startup stock is not liquid. You'd have to sit on the stock until there's some sort of 'liquidity event' - usually the sale of the company or an IPO. Beforehand sale of stocks is generally very difficult, usually not possible. I haven't really heard of companies buying back employee stocks (I guess they did it in 'Breaking Bad'? ;). If you get fired, and you don't want your stock options to expire worthless, assuming that they do expire, you'd have to exercise. And most likely you won't be able to sell that stock until a sale of the company or an IPO. The stock itself may also become worthless (bankruptcy). Note that the strike price really matters, some employee stock options are basically for free to exercise, because the strike price is very low. Sometimes the strike price is close to market value. If the strike price is low there may be a lot of taxes to pay, if it's high then you need to pay a lot for the stock itself. I'm not quite sure about silicon valley companies (I'm in Canada...). I've seen stock options expiring after 7 years or so. I've also heard of stock options that expire 3 weeks after the employment relationship. You should also be aware of the 'cliff period'. Most jobs won't give you proper stock options right away, but only after you have worked with them for a year. So if you quit after 10 months, you won't anything. Again, read your employment contracts (including stock option agreements), talk to a lawyer, inform yourself etc. Don't get burned by this stuff.