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That's true and it's not true. An increasing number of startups issue their grants such that they qualify as ISOs if exercised within the 90-day window but aut

That's true and it's not true. An increasing number of startups issue their grants such that they qualify as ISOs if exercised within the 90-day window but automatically convert to NSOs 90 days after departure (with the actual exercise deadline dependent on employee tenure), so that the employee and their tax advisors at time of departure get to decide how to handle the tradeoff of more time for reflection vs better tax treatment. What's more, if an employee gets more than $100k of exercisable options in a year - very possible especially in cases where early exercise is allowed - only $100k of those are treated as ISOs. There's no way in which the tax law privileges a short post-termination exercise period for the excess above $100k. Last, some companies use the same options plan both inside the US and outside, including my two most recent employers. Most employees working outside the US, with some exceptions like US citizens and green card holders, wouldn't have to care about this US tax law nuance.

carlosdp 5y ago
Yea I looked into this when we were forming our options plan after I read Sam Altman's article arguing for it. It's not as common as you might think yet. We have one of the big name corporate law firms that most VC-backed startups use, and when I asked about this kind of setup they hadn't heard of it before. Path of least resistance was to just do a regular ISO, especially since early team members are usually experienced startup people like us that are used to ISOs anyways. Would love to revisit it in the future and see if we can enact this sort of plan, although in our case since we're in the web3 space, the equity might not matter as much as the tokens (which don't get favorable treatment either way atm).
- leoqa 5y ago
  Does your company sell the tokens to account for tax liability when compensating employees with tokens? I can imagine a new hell where my bonus is paid in Foo tokens but it isn’t liquid and then I have a massive tax liability as the crypto market tanks.
- jkaplowitz 5y ago
  I agree it isn't the most common, but I did just work for a company that put this policy into place last year I think, so it's growing. It's certainly not something where a startup which wants to do it needs to break new ground, at any rate.

carlosdp 5y ago

Yea I looked into this when we were forming our options plan after I read Sam Altman's article arguing for it. It's not as common as you might think yet. We have one of the big name corporate law firms that most VC-backed startups use, and when I asked about this kind of setup they hadn't heard of it before. Path of least resistance was to just do a regular ISO, especially since early team members are usually experienced startup people like us that are used to ISOs anyways. Would love to revisit it in the future and see if we can enact this sort of plan, although in our case since we're in the web3 space, the equity might not matter as much as the tokens (which don't get favorable treatment either way atm).

leoqa 5y ago
Does your company sell the tokens to account for tax liability when compensating employees with tokens? I can imagine a new hell where my bonus is paid in Foo tokens but it isn’t liquid and then I have a massive tax liability as the crypto market tanks.
jkaplowitz 5y ago
I agree it isn't the most common, but I did just work for a company that put this policy into place last year I think, so it's growing. It's certainly not something where a startup which wants to do it needs to break new ground, at any rate.