3 ms·

Can you explain why RSUs are better than ISOs that convert to NSOs on departure?

• hkmurakami 10y ago
  long term capital gains. "Which one is better" depends on many factors including stage of company, risk tolerance of individual, legal precedence, marginal tax rates, outside wealth, etc.
  • x0x0 10y ago
    The benefit of iso->nso flips is, afaik, it's way cheaper than rsus for the employer and it gives the employee the ability to wait until you're in the money before exercising
    • hkmurakami 10y ago
      Yes it is definitely a tradeoff for the employee. For the employer, the cost of issuing RSUs I believe is tied with the fact that there would be no chance that the employee let go of their shares via not exercising their options (I do not believe RSUs are subject to employment tax). But if you have 10 year exercise periods, that accomplishes the same thing for the employer's perspective. The difference them becomes the tradeoff for the employee between optionality and a possibly lower tax rate.