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Why bother with options at all at that point? Why not just go directly to RSUs?
by HWR_14 5y ago
Why bother with options at all at that point? Why not just go directly to RSUs?
- gumby 5y agoRSUs are pretty awful since you don't have access to the 83(b) exemption and tax is paid at ordinary income rate rather than long term cap gains rate, so RSUs can't offer the same opportunity to build long term wealth. RSUs seem to make sense to public companies which don't meaningfully have access to all the kinds of compensation available to private companies. IANAL but RSUs seem like a ripoff for a private company to use them even if the common price is high compared to a standard ISO SOP.
- eftychis 5y agoRSUs are terrible for a private company that aspires to go public, because the moment they trigger -- usually IPO + enough volume traded -- the company owes half of them in taxes (regular income taxes). This places a considerable pressure on the stock and causes a crash on the price usually -- as everyone from peon to executive have to sell half of their multi-year "vestments." So instead of the company raising slowly money via the market and the employees getting a good check when they decide to slowly sell, Uncle Sam gets some taxes up front... (And usually due to the likely crash, less than they would.)
- yibg 5y agoTaxes. If you give RSUs, the value of them might get really high in later years, along with the tax burden. And because the RSUs are liquid you can’t sell them to cover tax.