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> so they take no risk of paying taxes on something which might be worthless If a the time of a liquidity event the stock is worth less than an employee's stri
by ngorski 11y ago
> so they take no risk of paying taxes on something which might be worthless
If a the time of a liquidity event the stock is worth less than an employee's strike price, they'll still be underwater. They'll either owe the loan back (the difference between the strike price and exit valuation) or the loan is forgiven and they owe income taxes on the forgiven debt. So there's still risk of owing tax on equity worth less than the current valuation at the time of their offer, right?
- AndrewKemendo 11y agoThere is no underwater because employees don't pay anything for their shares. So there's still risk of owing tax on equity worth less than the current valuation at the time of their offer, right? Nope. Because of the 83b election, they pay no tax as the shares vest and pay no tax until they sell their shares.