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But the stock will be considered income in the IPO year and subject to withholding, right? So some employees will work for a negative potentially six figure sa
by superuser2 10y ago
But the stock will be considered income in the IPO year and subject to withholding, right?
So some employees will work for a negative potentially six figure salary (100% withholding + 5-6 figures owed to the IRS) with no way to pay the IRS until they can sell the stock in the next year?
That can't be right. How does this work?
- matchagaucho 10y agoRSUs are "restricted" in the sense that employees do not own them until exercised, which defers the tax burden. Typically, a portion of the RSUs are withheld to cover taxes when exercised.
- zwily 10y agoYou don't exercise RSUs. RSUs are taxable as they vest. At my company, a portion of your vesting RSUs are sold every time to pay the tax on them, unless you provide some cash to pay the tax.
- superuser2 10y agoRight, I am interested in whether they would do this during the lockup period. It would seem that if employees were contractually obligated to hold their positions, selling to cover taxes wouldn't be allowed.
- DannyBee 10y agoYou know, i've never really delved into the details of this, but i wonder if it's only required to be withheld, not sold. That is, uber could withhold the right number of shares, and is selling them itself or repurchasing them and paying out the FMV. In any case, Uber has to pay the withholding, and i suspect they have no magic way around this.
- home_boi 10y agoWhat happens when private RSUs vest? Do companies withhold some RSUs and the government considers the tax bill paid by the withheld amount?
- redshirtrob 10y agoThat depends on the stock plan agreement. One possibility is to make an IPO a vesting requirement. This guarantees a public market to sell them into.
- superuser2 10y agoSure, but what about the lockup period between IPO and actual liquidity?
- DannyBee 10y agoRSU's are sold at vest to cover taxes.
- URSpider94 10y agoBut if Uber isn't yet public, and won't allow a market in its shares, who would one sell the shares TO to cover the tax?
- DannyBee 10y agoRSU's are only restricted until vest. Once they vest, they are unrestricted stock. Uber cannot control what you do with that stock (or at least, i'm not familiar with any company that has done so, and not sure that it's legal to do so)
- URSpider94 10y agoAs long as they are private, they can put lots of restrictions on what can be done with shares. That's the point of the whole article. Ultimately, people are allowed to exercise their ISO's and turn them into shares, they just can't do anything with those shares -- Uber won't buy them, and won't allow you to sell them to anyone else! I think the sibling post answered the question -- RSU's don't vest until the company goes public. So, instead of getting illiquid comp, you just get none until Uber is public.
- DannyBee 10y agoISO != RSU. They are different forms of restricted property, and when it comes to restricted stock, as i said, it's only restricted until vest. They can control when it vests, but even if they are private, they can't control what you do with restricted stock once it is vested, because it is then unrestricted stock, whether uber is private or not.
- limeyx 10y agoThey actually can if they determine that you possess non-public information which could allow you to gain from the stock in a manner that can be considered "insider trading" Typically this is only for short periods for higher-up people but it can affect "normal" engineers too (say you do a tech due diligence for an acquisition etc....)