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Early startups can do this. The problem for larger (valuable) startups is that the grant of stock would be taxed (as income). Options get around this. (The tax
by ammon 11y ago
Early startups can do this. The problem for larger (valuable) startups is that the grant of stock would be taxed (as income). Options get around this. (The tax law makes the rather dubious claim that options granted at the market value of the company have zero value.)
- jtfairbank 11y agoThe main tax benefit of options is that you don't have to pay taxes until you exercise them (convert them into real stock). So even if you get the options at a discount then you don't have to pay until you want to convert them / cash them in (i.e. cost to exercise is $15 and the value per share when they are granted is $20).