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I work at a public company, about half of my TC is stocks. I get them “for free”, and I can immediately sell them for real money (which I do and buy index funds
by ghouj 6y ago
I work at a public company, about half of my TC is stocks. I get them “for free”, and I can immediately sell them for real money (which I do and buy index funds).
AIUI, startups “compensate” you in paper stock that you can’t sell, and even worse, they actually make you pay them for it! This seems like a completely terrible deal.
- TheDom 6y agoIt's not a terrible deal, ISOs can be very advantageous from a tax perspective.
- gkilmain 6y agoI'm sure if you think its terrible you could always say you don't want the stock?
- closeparen 6y agoAh, but here at $startup we want team players who are fully bought in to our vision.
- tempsy 6y agoRSUs are taxed like income though, so from a tax perspective it’s pretty awful. Being early at a startup with options that you early exercise has far superior tax benefits.
- aqme28 6y agoWhy is that awful? It's compensation and should be treated that way.
- tempsy 6y agoBecause the tax treatment for options is far superior, especially if you’re relatively early. You’re paying 40%+ in taxes for RSUs as soon as you vest. If you’re able to early exercise stock at a startup you owe minimal taxes when you join a company and then when you sell you’re just paying long term capital gains taxes which is a lot lower than 40%.
- aqme28 6y agoAs someone who once had a lot of ISOs, I can tell you that is completely untrue in practice. 40% off of liquid RSUs is far preferable to AMT taxes on something that you are unable to sell and may not ever be able to sell.
- tempsy 6y agoit depends on the situation. that’s why you early exercise when possible. if you’re going to wait to exercise after vesting and the out of pocket costs are too high to exercise then it doesn’t make as much sense. but with RSUs it’s just like income, which again isn’t a great tax treatment especially if you live in a state with state income taxes.
- walshemj 6y agoIts not income as in the way your salary is
- joshuamorton 6y agoOnly if you're independently wealthy enough to exercise and pay tax now.
- triceratops 6y agoI don't think they're comparable tbh. RSUs have a wildly lower risk profile and higher expected value. ISOs are only more valuable in outlier cases.
- tempsy 6y agoYes then 2020 happened. Startup employees are finally getting liquid across many startups and will come out wildly ahead of most big tech cos.
- aardvark291 6y ago> RSUs are taxed like income though, so from a tax perspective it’s pretty awful. One approach is to accomplish the tax withholding by withholding some of the RSU grant at each vesting. This seems pretty reasonable, since you aren't out any cash to pay the taxes on an illiquid asset.
- deleted 6y ago[deleted]
- thesausageking 6y agoI don't think early AirBnB employees think their equity was a terrible deal. 0.01% of equity is now worth $9m.
- ghouj 6y agoMost companies aren’t Airbnb. But really my objection is that the company is “offering” you the opportunity to pay them to “buy” part of your TC.
- TuringNYC 6y agoIf someone has a good way to find the next AirBnB, i would love to know. In the absence of that, from all the math I do, it seems the better thing is to work at a large tech firm, take the 40-60% pay increase and just invest that into the stock market or index options if you want massive leveraged upside.
- joshuamorton 6y agoAnd when did you need to join to get .01%? First 200 people? So 2011 or so?
- triceratops 6y agoProbably first 20 if you're a grunt. First 50 if you're management.
- mancerayder 6y agoHow come in all the companies I worked for (in NY, not SV) I never ever was told what percentage of equity I had, and was just given a magic number. 25K units. 10K units. 100K units. Common shares. 4 year vest. I've had fairly senior roles so reading all the articles about how people can get screwed reminds me that I'm getting screwed, in a completely different way though and probably a lot more simple a way.
- ska 6y agoYou should always ask, and they should always tell you. Depending on the position, you may also want a look at the cap table but more often just the summary or even current %age. Part of the reason people don't do this by default is that it's dynamic. I can promise you 100k shares today and that's what happens 3 mo from now when you start, but hiring anyone else (or you for that matter) will change the %age number. By the way, especially early on a primary reason you should ask isn't to value the equity but to get a better idea of how the offer values you....
- chadash 6y agoThe problem is that if you don't make employees pay to exercise, then whatever options you give them become taxable compensation. As an employee, I'd rather not pay taxes on shares of a company that I can't sell anytime soon.
- deleted 6y ago[deleted]