4 ms·

I joined as a regular non-manager, non-lead employee. Actually, I started as an intern, and was offered a full time job immediately after that. I was employee #

I joined as a regular non-manager, non-lead employee. Actually, I started as an intern, and was offered a full time job immediately after that. I was employee #~100. I sold 1625 shares in a secondary round for $14,000. When the company eventually exited, I sold 27,375 shares for $1.1M. I have 1000 shares remaining. If I hadn’t sold anything, my shares would be worth about $5.1M today.

nodesocket 8y ago
Curious why you have 1,000 shared remaining? Are you still employed there? Also, what was the tax bill on the $14k and $1.1M in terms of percentage? Was it long term capital gains 15% fixed?
- exithrowaway564 8y ago
  I am no longer employed there. I hold them mostly for nostalgic purposes. I sold all of my shares because it seemed foolish to have 100% of my net worth in one company. Holding 1000 shares feels okay. Tax bill was ~0 on the $14K and my marginal tax rate on half (I’m Canadian)
  - nodesocket 8y ago
    How do you not owe any tax on $14,000 income? Is that some Canadian benefit?
    - desdiv 8y ago
      When a Canadian has $14,000 in capital gains, their tax liability is calculated as: $14,000 * 50% * marginal tax rate. The 50% is basically the Canadian way of taxing capital gains lower than earned income. What GP was trying to convey, albeit in a slightly confusing fashion, was this: 1. He had $14,000 in capital gains 2. No tax was directly accessed against this $14,000 amount, in other word: "tax bill was ~0 on the $14K". 3. The taxable portion of his capital gains was $14,000 * 50% = $7000 4. He paid his marginal tax rate on the taxable portion of his capital gains ($7000)
      - exithrowaway564 8y ago
        Sorry, yeah, could have been a lot more clear there. I was making extremely little salary at the time of the secondary, so I paid something like 20% tax on half, for about $1400 in taxes on $14k proceeds.
  - aws_ls 8y ago
    Wise move. Better to sell if off, to avoid "all eggs in one basket" and have the basket fall. 20% earned in a probability friendly way, is much better than 100% in a low probability way (as very high chances would have been of it nearing 0%)
- gnicholas 8y ago
  FYI, in the US there is the Qualified Small Business Stock exemption, which can significantly reduce the tax owed on the sale of stock of a company that was once small. It can be publicly-traded at the time of sale. Back when I was a tax lawyer, you could exclude 50% of your gain, though the rules may have changed. Also, if you rolled over your gains into other “qualified small businesses”, you could defer taxation altogether.
  - nodesocket 8y ago
    Does this exemption qualify if selling a business that has no stock, just a standard asset sale?
    - gnicholas 8y ago
      It applies only to the sale of stock, as the name implies. One can restructure an asset sale as a stock sale in order to take advantage, if the tax benefit is big enough. Not sure what you mean about a business that has no stock (sole proprietorship?).

nodesocket 8y ago

Curious why you have 1,000 shared remaining? Are you still employed there? Also, what was the tax bill on the $14k and $1.1M in terms of percentage? Was it long term capital gains 15% fixed?

exithrowaway564 8y ago
I am no longer employed there. I hold them mostly for nostalgic purposes. I sold all of my shares because it seemed foolish to have 100% of my net worth in one company. Holding 1000 shares feels okay. Tax bill was ~0 on the $14K and my marginal tax rate on half (I’m Canadian)
- nodesocket 8y ago
  How do you not owe any tax on $14,000 income? Is that some Canadian benefit?
  - desdiv 8y ago
    When a Canadian has $14,000 in capital gains, their tax liability is calculated as: $14,000 * 50% * marginal tax rate. The 50% is basically the Canadian way of taxing capital gains lower than earned income. What GP was trying to convey, albeit in a slightly confusing fashion, was this: 1. He had $14,000 in capital gains 2. No tax was directly accessed against this $14,000 amount, in other word: "tax bill was ~0 on the $14K". 3. The taxable portion of his capital gains was $14,000 * 50% = $7000 4. He paid his marginal tax rate on the taxable portion of his capital gains ($7000)
    - exithrowaway564 8y ago
      Sorry, yeah, could have been a lot more clear there. I was making extremely little salary at the time of the secondary, so I paid something like 20% tax on half, for about $1400 in taxes on $14k proceeds.
- aws_ls 8y ago
  Wise move. Better to sell if off, to avoid "all eggs in one basket" and have the basket fall. 20% earned in a probability friendly way, is much better than 100% in a low probability way (as very high chances would have been of it nearing 0%)
gnicholas 8y ago
FYI, in the US there is the Qualified Small Business Stock exemption, which can significantly reduce the tax owed on the sale of stock of a company that was once small. It can be publicly-traded at the time of sale. Back when I was a tax lawyer, you could exclude 50% of your gain, though the rules may have changed. Also, if you rolled over your gains into other “qualified small businesses”, you could defer taxation altogether.
- nodesocket 8y ago
  Does this exemption qualify if selling a business that has no stock, just a standard asset sale?
  - gnicholas 8y ago
    It applies only to the sale of stock, as the name implies. One can restructure an asset sale as a stock sale in order to take advantage, if the tax benefit is big enough. Not sure what you mean about a business that has no stock (sole proprietorship?).