3 ms·
There are some downsides but this is one of the reasons that phantom stock and phantom stock options[1] can be good for employees as there is essentially nothin
by Spoom 10y ago
There are some downsides but this is one of the reasons that phantom stock and phantom stock options[1] can be good for employees as there is essentially nothing taxable until the actual payout, which is treated as regular income and can have taxes withheld like a normal bonus.
1. https://en.wikipedia.org/wiki/Phantom_stock https://en.wikipedia.org/wiki/Phantom_stock
- skewart 10y agoPhantom stock is super interesting. Do startups ever offer it? I'd be curious to know how it worked out. It seems like it would be better than the worst case with traditional options but not as good as the best case. I mean, ideally you exercise your options early at a very low price and then enjoy long-term capital gains tax rates. Phantom stock means you'll always pay way more in taxes when you get your equity-based payout - 50%-60% vs 20%-30%. At the same time though you are never at risk of ending up underwater. It seems like phantom stock would be great as an option for companies to offer employees - i.e. you could either get a traditional options structure or phantom stock. I wouldn't be surprised if there were negative accounting or tax consequences for the company though. And maybe the administrative overhead for offering phantom stock in addition to traditional options would be prohibitive for small startups.