Handing out stock is taxable to the employee at the moment it's handed out, even though (for non-public companies) they can't sell it. It'd be ruinous to give a

Handing out stock is taxable to the employee at the moment it's handed out, even though (for non-public companies) they can't sell it. It'd be ruinous to give an employee $1M of startup stock, since they'd owe around 400k tax on it. So the standard is to hand out options with a strike price equal to the current fair market value. The employee eventually gets the upside, but not the downside.