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Yeah, this always existed but the magnitude is so much greater for so many more people now because companies are staying private longer. I think it's healthy t

Yeah, this always existed but the magnitude is so much greater for so many more people now because companies are staying private longer. I think it's healthy to just let vesting mean you get to take it with you, period, no catch. But it's worth noting this means there will be fewer options returned to companies in comparison to the last boom. Scott Kupor made this point although he framed it in a poor way.[1] He notes that it will in theory result in more dilution for employees that stay. [1] https://a16z.com/2016/06/23/options-timing/ https://a16z.com/2016/06/23/options-timing/

caseysoftware 9y ago
> I think it's healthy to just let vesting mean you get to take it with you, period, no catch. This sounds great in concept but in practice acquiring the shares is the taxable event. So if a company just gives you shares, that's the taxable event. And since you get taxed on the delta between your strike price and the "fair market value" (even though there isn't one), it would happen on the company's schedule, not your own. If you extended the exercise window for N years, that would mitigate most of it because you could wait to execute until it's liquid. Or not execute at all if it goes under. * I've been through two IPOs in the last couple years.. good planning shielded me from having major tax liabilities.
- astura 9y ago
  >So if a company just gives you shares, that's the taxable event. Unless they put them in your 401k, which is exactly what many (most?) companies do.
  - Eridrus 9y ago
    I have literally never heard of this...
    - astura 9y ago
      Maybe not in a startup? I have company stock given to me in my 401k. https://www.fidelity.com/viewpoints/personal-finance/company-stock https://www.fidelity.com/viewpoints/personal-finance/company... >More than 15 million people own about $400 billion of company stock in Fidelity-administered workplace retirement plans alone
      - caseysoftware 9y ago
        I've never heard of it either but have some reading ahead of me. Though I've been at both companies pre-IPO so that is probably the first distinction. Post-IPO, the rules are quite a bit different so maybe it's an option now..
        sjg007 9y ago
        Mitt Romney did this I believe.
      - nojvek 9y ago
        Isn't there a 401k limit per year on how much you can do this? Like 18k or something. I can see people abusing this and putting million into the 401k tax free
        nerdwaller 9y ago
        Yes, for 2017 the limit is 18k . But it’s worth noting for those that may not know how a 401k works (I’m not suggesting that’s you) - it’s not “tax free”, it’s just deferred until withdrawn (for a traditional 401k, there is also a Roth variant like IRAs).
        astura 9y ago
        Capital gains are tax free.
        nerdwaller 9y ago
        True, as of current only distributions from the account are taxed (and are taxed at current income rates, what happened to make the account grow doesn't come into play). Good clarification!
- abalone 9y ago
  > If you extended the exercise window for N years... We agree. That's all I meant by "you get to take it [your vested options] with you," as opposed to turning them in on the way out the door if you can't pay the strike price + AMT.

caseysoftware 9y ago

> I think it's healthy to just let vesting mean you get to take it with you, period, no catch. This sounds great in concept but in practice acquiring the shares is the taxable event. So if a company just gives you shares, that's the taxable event. And since you get taxed on the delta between your strike price and the "fair market value" (even though there isn't one), it would happen on the company's schedule, not your own. If you extended the exercise window for N years, that would mitigate most of it because you could wait to execute until it's liquid. Or not execute at all if it goes under. * I've been through two IPOs in the last couple years.. good planning shielded me from having major tax liabilities.

astura 9y ago
>So if a company just gives you shares, that's the taxable event. Unless they put them in your 401k, which is exactly what many (most?) companies do.
- Eridrus 9y ago
  I have literally never heard of this...
  - astura 9y ago
    Maybe not in a startup? I have company stock given to me in my 401k. https://www.fidelity.com/viewpoints/personal-finance/company-stock https://www.fidelity.com/viewpoints/personal-finance/company... >More than 15 million people own about $400 billion of company stock in Fidelity-administered workplace retirement plans alone
    - caseysoftware 9y ago
      I've never heard of it either but have some reading ahead of me. Though I've been at both companies pre-IPO so that is probably the first distinction. Post-IPO, the rules are quite a bit different so maybe it's an option now..
      - sjg007 9y ago
        Mitt Romney did this I believe.
    - nojvek 9y ago
      Isn't there a 401k limit per year on how much you can do this? Like 18k or something. I can see people abusing this and putting million into the 401k tax free
      - nerdwaller 9y ago
        Yes, for 2017 the limit is 18k . But it’s worth noting for those that may not know how a 401k works (I’m not suggesting that’s you) - it’s not “tax free”, it’s just deferred until withdrawn (for a traditional 401k, there is also a Roth variant like IRAs).
        astura 9y ago
        Capital gains are tax free.
        nerdwaller 9y ago
        True, as of current only distributions from the account are taxed (and are taxed at current income rates, what happened to make the account grow doesn't come into play). Good clarification!
abalone 9y ago
> If you extended the exercise window for N years... We agree. That's all I meant by "you get to take it [your vested options] with you," as opposed to turning them in on the way out the door if you can't pay the strike price + AMT.