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> “For later employees make sure the company offers “refresh” option grants to longer-tenured employees. Better yet, offer restricted stock units (RSUs). Restri

> “For later employees make sure the company offers “refresh” option grants to longer-tenured employees. Better yet, offer restricted stock units (RSUs). Restricted Stock Units are a company’s promise to give you shares of the company’s stock. Unlike a stock option, which always has a strike (purchase) price higher than $0, an RSU is an option with a $0 purchase price. The lower the strike price, the less you have to pay to own a share of company stock. Like stock options, RSU’s vest.” Aren’t RSUs taxed at the time of grant? Therefore in a refresh grant, the employee would get hit with a large tax bill on the fair market price of the equity, even with an 83(b) election. Most people probably don’t have that kind of money to lay down up front on something that could still go bust. At least with options, you can always (unless you get fired) stay long enough to see the come through to IPO where options are then a sure thing. Am I missing something here on the quote above?

jeremyis 6y ago
I think it’s time of liquidity for double triggered RSUs. That’s what big pre IPO companies give and at IPO all the accrued RSUs are taxed as income.
draw_down 6y ago
Don’t think so because they don’t have value at time of grant. They have a double trigger structure that doesn’t grant the employee a share until liquidity event. From a legal perspective there is a “significant risk” of them expiring worthless (typical window is 7 years I believe). This makes it not a simple windfall for the employee.
commandlinefan 6y ago
> Aren’t RSUs taxed at the time of grant? Not the times I've had them - they were always taxed at time of vesting. There's always an option (or at least I was always offered an option) to sell back some of the stock at the time to cover the tax, even if you weren't exercising the remainder right away. That way there was no out-of-pocket cost to you at the time of vesting (but you did have the option to keep all the RSU's and pay the tax due if you wanted to).
danans 6y ago
> Aren’t RSUs taxed at the time of grant? Therefore in a refresh grant, the employee would get hit with a large tax bill on the fair market price of the equity, even with an 83(b) election. Usually, some portion of the vested RSUs are sold to cover the tax liability, and the rest go into your investment account. The tax rate is the same as regular income.
nfriedly 6y ago
My last employer, Tanium, offered single-trigger RSU's (vesting required time but no liquidity event) - they were taxed as they vested. We had a couple of choices to pay the taxes: the default was that the employer would buy back some of the stock and use that cash to pay the taxes. Employees would get to keep 70-some percent of the stock. The other option was that employees could write the company a check for the taxes shortly before vesting, and then keep all of the stock.

jeremyis 6y ago

I think it’s time of liquidity for double triggered RSUs. That’s what big pre IPO companies give and at IPO all the accrued RSUs are taxed as income.

draw_down 6y ago

Don’t think so because they don’t have value at time of grant. They have a double trigger structure that doesn’t grant the employee a share until liquidity event. From a legal perspective there is a “significant risk” of them expiring worthless (typical window is 7 years I believe). This makes it not a simple windfall for the employee.

commandlinefan 6y ago

> Aren’t RSUs taxed at the time of grant? Not the times I've had them - they were always taxed at time of vesting. There's always an option (or at least I was always offered an option) to sell back some of the stock at the time to cover the tax, even if you weren't exercising the remainder right away. That way there was no out-of-pocket cost to you at the time of vesting (but you did have the option to keep all the RSU's and pay the tax due if you wanted to).

danans 6y ago

> Aren’t RSUs taxed at the time of grant? Therefore in a refresh grant, the employee would get hit with a large tax bill on the fair market price of the equity, even with an 83(b) election. Usually, some portion of the vested RSUs are sold to cover the tax liability, and the rest go into your investment account. The tax rate is the same as regular income.

nfriedly 6y ago

My last employer, Tanium, offered single-trigger RSU's (vesting required time but no liquidity event) - they were taxed as they vested. We had a couple of choices to pay the taxes: the default was that the employer would buy back some of the stock and use that cash to pay the taxes. Employees would get to keep 70-some percent of the stock. The other option was that employees could write the company a check for the taxes shortly before vesting, and then keep all of the stock.